Rupee looks to keep momentum heading into US inflation data

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee, on Thursday, will be looking to build on recent momentum in the lead-up to U.S. inflation data that will hold cues on when the Federal Reserve will kick off rate cuts.

Non-deliverable forwards indicate the rupee will have a flat to slightly higher opening, compared with its close of 83.0350 in the previous session.

The rupee is on a six-day winning run and reached a near one-month-high late in Wednesday’s session.

“For me, what happened late yesterday is notable. You can say that, after a long time, there is momentum on one side,” a forex trader at a bank said.

“Today’s session is important. Let’s see if there is appetite to push (USD/INR) lower before the U.S. inflation number, or maybe there will be more inflows.”

The U.S. inflation update is expected to show headline consumer prices rose 0.2% month-on-month in December, while the core measure increased 0.3%. On a year-on-year basis, core prices are estimated to have increased by 3.8%, compared to a 4% rise in November, providing more evidence of easing inflation.

Banking on this, investors have priced in a series of Federal Reserve rate cuts this year. The only uncertainty is the timing of the first one, with futures pricing in a high probability of a kick-off in March, although some economists think it will be in May.

“The latest decent U.S. job figures suggest there’s no need for an imminent reduction and it’s one of the reasons why we think we’ll be waiting until May,” ING Bank said in a note.

The dollar was struggling before the data. The dollar index was down and Asian currencies were up 0.1% to 0.4%.


** One-month non-deliverable rupee forward at 83.10; onshore one-month forward premium at 8.75 paisa

** Dollar index down at 102.25

** Brent crude futures up 0.3% at $77 per barrel

** Ten-year U.S. note yield at 4.03%

** As per NSDL data, foreign investors sold a net $64.6 million worth of Indian shares on Jan. 9

** NSDL data shows foreign investors bought a net $173.4 million worth of Indian bonds on Jan. 9

(Reporting by Nimesh Vora; Editing by Savio D’Souza)