Key points
- The rupee’s non-deliverable forwards indicate an opening range of 83.48-83.50 per U.S. dollar.
- Investors anticipate Powell’s comments for clues on potential rate cuts.
The Indian rupee is poised to open largely unchanged on Tuesday as traders eagerly await Federal Reserve Chair Jerome Powell’s testimony before Congress.
The rupee’s movement has been constrained within a broad range of 83.35-83.60 against the U.S. dollar for over a month, reflecting a period of consolidation amid global economic uncertainties.
Opening range and expectation
See: Indian rupee trading at 83.557 as seen on the VT Markets app.
Non-deliverable forwards suggest the rupee will open at 83.48-83.50 to the U.S. dollar, close to the previous session’s 83.4925. This narrow range reflects the cautious sentiment prevailing among traders as they await Powell’s insights.
A currency trader at a bank noted that the risk lies in Powell potentially adopting a more dovish stance than expected. Such a scenario could suppress the dollar, possibly breaking the rupee out of its current range.
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Powell’s testimony and market sentiment
Powell’s testimony, scheduled for Tuesday and Wednesday, follows a series of softer U.S. economic data. Last week’s data showed the U.S. unemployment rate reached a 2.5-year high, and the services sector activity fell to a four-year low. These developments have led to a decline in U.S. Treasury yields and a near 1% drop in the dollar index.
Market reactions and indicators
In response to the economic data and anticipation of Powell’s comments, the dollar index stands at 105.02. Brent crude futures are down 0.2%, trading at $85.6 per barrel, while the ten-year U.S. note yield is at 4.28%.
Foreign investors bought a net $379.6 million worth of Indian shares on July 5 and a net $59.5 million worth of Indian bonds on the same day.
The Indian rupee’s immediate future hinges on Powell’s testimony and its implications for U.S. monetary policy. As investors await his insights, the rupee’s tight range suggests a cautious market approach, ready to react to any shifts in the economic landscape.
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