Rupee to see little respite on Fed’s higher-for-longer bets

By Jaspreet Kalra and Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is likely to hover near its lifetime low on Friday, after U.S. inflation data reinforced expectations that the Federal Reserve will hold interest rates higher for longer.

Non-deliverable forwards indicate rupee will open at around 83.25 to the U.S. dollar, just short of its record low of 83.29, and nearly unchanged from the previous session.

Asian currencies were down 0.3% to 0.8% on the back of rising U.S. Treasury yields.

“It looks like the familiar narrative will play out. USD/INR will be well bid on weak Asia, which will match up to belief that RBI will intervene,” a spot trader at a Mumbai-based bank said.

The Reserve Bank of India has been intervening to prevent the currency from slipping to a record low and the expectations that the central bank will sell dollars are “deep rooted” at present, he said.

Market participants will also be on the lookout for any pre-open U.S. dollar sales from the RBI in the non-deliverable forward market, a foreign exchange trader at a private bank said.

The dollar index climbed, U.S. equities declined and Treasury yields rose after headline U.S. consumer price index rose 0.4% month-on-month in September, slightly higher than expected. The more important core measure rose 0.3%.

The data suggested that more rate hikes by the Fed remained a possibility, or the U.S. central bank was at least likely to hold rates higher for longer, analysts said.

“With core and headline inflation running at or above 0.3% m-o-m for a second month in September, the Fed will find it difficult to declare victory in getting inflation back to the 2% target soon,” DBS Bank stated in a note.”

Meanwhile, India’s CPI data for September came in lower than expected at 5.02% year-on-year.


** One-month non-deliverable rupee forward at 83.34; onshore one-month forward premium at 10.50 paisa

** USD/INR NSE October futures settled at 83.2875 on Thursday

** USD/INR October forward premium at 4.75 paisa

** Dollar index at 106.43

** Brent crude futures up 0.6% at $86.5 per barrel

** Ten-year U.S. note yield at 4.68%

** As per NSDL data, foreign investors sold a net $21.4mln worth of Indian shares on Oct. 11

** NSDL data shows foreign investors bought a net $2.3mln worth of Indian bonds on Oct. 11

(Reporting by Jaspreet Kalra and Nimesh Vora; Editing by Varun H K)