Rupee likely higher on dollar decline post Powell's testimony
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The Indian rupee is expected to rise on Thursday, helped by the dollar's fall despite Federal Reserve Chair Jerome Powell's fairly hawkish comments to U.S. lawmakers.
Non-deliverable forwards indicate rupee will open at around 81.94-81.98 to the U.S. dollar compared with 82.0375 in the previous session.
The offshore Chinese yuan recovered to 7.1690 to the dollar, having fallen below 7.20 at one point in the previous session. Other Asian currencies were up 0.1% to 0.3%.
With USD/INR likely back below 82, thanks to how Asia is doing, the question is whether the pair will fall below the 81.85-81.90 support, a forex trader at a public sector bank said.
In remarks to U.S. lawmakers on Wednesday, Powell reiterated that the Fed remains committed to bringing inflation back to 2% levels and more rate increases are "a pretty good guess."
The comments came on the back of the Fed's updated dot plot, out last week, which showed a median projection of two additional rate hikes this year.
"Powell reaffirmed the Fed’s determination to fight inflation," Well Fargo Advisors said in a daily note.
The message points to a higher possibility of further interest rate hikes, contrary to the expectations of some market participants that the rate hike cycle is over, it said.
U.S. equities declined for the third straight day on Wednesday while yields rose. The dollar index, however, dropped 0.5%.
Powell is scheduled to testify before the U.S. Senate Banking Committee on Thursday. DBS Group Research pointed out that "the second session seldom surprises."
The Bank of England's decision on interest rates is due on Thursday, a day after U.K. inflation surprised on the upside. Investors are split between a 25-basis-point and a 50bp hike.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.03; onshore one-month forward premium at 7 paisa ** USD/INR NSE June futures settled on Wednesday at 82.0250 ** USD/INR forward premium as of Jun. 21 for end current month is 1.5 paisa ** Dollar index at 102.02 ** Brent crude futures down 0.3% at $76.9 per barrel ** Ten-year U.S. note yield at 3.73% ** SGX Nifty nearest-month futures down 0.2% at 18,866 ** As per NSDL data, foreign investors bought a net $714.4mln worth of Indian shares on Jun. 20
** NSDL data shows foreign investors sold a net $46.5mln worth of Indian bonds on Jun. 20
