India rupee to not react much to above expectations US inflation

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is seen largely unchanged at open on Thursday after the higher-than-expected U.S. inflation number did not have a lasting impact on the dollar.

Non-deliverable forwards indicate the rupee will open around the same level as its previous close of 82.9850.

The dollar index was at 104.78, roughly at the same level it was prior to the U.S. inflation data.

U.S. Treasury yields jumped following the data, but retreated and are now at levels lower than before the inflation reading.

The U.S. consumer price index rose by 0.6% month-on-month in August, the largest increase since June 2022. The more important core CPI rose by 0.3%, slightly higher than what economists had expected.

The slightly higher reading on core inflation is not expected to impact what the U.S. Federal Reserve will do at its meeting next week.

“While somewhat above consensus, we do not expect report to affect the outcome of the September Federal Open Market Committee meeting—for which we expect unchanged policy,” Goldman Sachs said in a note.

Goldman Sachs maintained its call that the Fed will opt not to hike at the November meeting either.

Investors were not too sure of that, with futures indicating a near 40% probability of a rate hike in November. [FEDWATCH]

ANZ said that the August inflation was not sufficient to prompt a re-pricing in Fed expectations.

“However, the data suggest the Fed will need to be alert to the potential for any re-acceleration in inflation through the autumn,” ANZ said.

Focus now turns to the European Central Bank rate decision later in the day. Investors reckon there is a near 60% chance of a 25-basis-points rate hike.

The euro was slightly up against the dollar in Asia.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.04; onshore one-month forward premium at 9.5 paisa ** USD/INR NSE September futures settled on Wednesday at 83.02 ** USD/INR September forward premium at 4.25 paisa ** Dollar index at 104.78 ** Brent crude futures up 0.4% at $92.3 per barrel ** Ten-year U.S. note yield at 4.24%

** As per NSDL data, foreign investors sold a net $39.9 mln worth of Indian shares on Sept. 12

** NSDL data shows foreign investors bought a net $70.9 mln worth of Indian bonds on Sept. 12

(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)