The Indian rupee is poised to maintain its position above 83 against the U.S. dollar in the upcoming session, influenced by the decline in U.S. Treasury yields, reducing demand for the greenback. Projections from non-deliverable forwards suggest a slightly higher opening for the rupee compared to its previous close at 82.9650. A forex trader anticipates a favorable day for the rupee, expecting consolidation after two consecutive positive days. The currency’s short-term outlook is reinforced by a budget supporting continued bond inflows.
Despite the promising environment, the USD/INR pair has robust support at the current level, prompting a cautious assessment of whether there is a willingness to drive it lower. The 10-year U.S. Treasury yield’s dip to 3.82%, driven by safe-haven demand amid renewed concerns about U.S. regional banks, along with moderating labor costs and higher-than-expected jobless claims, contributes to the rupee’s stability. Despite Federal Reserve Chair Jerome Powell’s indication that a March interest rate cut is unlikely, the two-year U.S. yield briefly fell below 4.15%, leading to the dollar index’s worst performance in over a month.
The market now shifts its focus to the U.S. nonfarm payrolls report later in the day. BofA Securities estimates a rise of 175,000 jobs in January, slightly below the 193,000 average over the previous six months. The cumulative rate cuts anticipated for 2024 have increased post the Fed meeting mid-week. The evolving global economic landscape, especially U.S. economic indicators, will play a crucial role in shaping the trajectory of the rupee against the U.S. dollar in the coming days.
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