Rupee winning run to pause on dollar rally ahead of Powell’s speech

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is expected to decline on Friday, halting a three-day winning streak, after the dollar index reached a two-month high on weak risk appetite and ahead of Federal Reserve Chair Jerome Powell’s speech.

Non-deliverable forwards indicate rupee will open at around 82.62-82.64 to the U.S. dollar compared with 82.5725 in the previous session.

The rupee climbed to a three-week high of 82.3625 on Thursday.

The drop back below 82.50 (after reaching near 82.36) “has more likely than not soured the overall momentum,” a forex trader at a Mumbai-based bank said.

“And with the dollar index where it is, you would have to say the bias on the rupee in today’s session is on the downside.”

The dollar index rallied 0.6% on Thursday and advanced more in the Asian session to make it to its highest level in two-and-half months.

The decline in U.S. equities, U.S. Treasury yields resuming their upward march, and data that indicated that the U.S. labour market was holding up well all contributed to the dollar index’s move to above 104.

The S&P 500 Index dropped 1.4% and the 10-year U.S. Treasury yield rose to 4.25%.

Powell’s speech at the Jackson Hole Symposium later in the day is in focus with investors looking for hints on whether interest rates will rise more and what Powell makes of the recent sell on U.S. Treasuries.

“Today’s speech by Powell will get a great deal of scrutiny,” ING Bank said in a note ” …the majority view being that he will tread a cautious path with respect to any further potential tightening, looking for confirmation from the totality of the data before committing to any additional hikes.”

KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.72; onshore one-month forward premium at 8.25 paisa ** USD/INR NSE August futures settled on Thursday at 82.5750 ** USD/INR August forward premium at 1.25 paisa ** Dollar index up at 104.16 ** Brent crude futures up 0.4% at $83.7 per barrel ** Ten-year U.S. note yield at 4.25%

** As per NSDL data, foreign investors bought a net $108.7mln worth of Indian shares on Aug. 23

** NSDL data shows foreign investors bought a net $8.8mln worth of Indian bonds on Aug. 23

(Reporting by Nimesh Vora; Editing by Janane Venkatraman)