Prospect of Fed rates cut to help rupee amid Donald Trump worries
The Indian rupee, on Friday, will likely get support from remarks by a Federal Reserve official that the central bank may deliver more rate cuts this year than forecasted in December, which spurred a further dip in U.S. Treasury yields.
The 1-month non-deliverable forward indicated that the rupee will open unchanged-to-marginally higher from its close of 86.55 per U.S. dollar in the previous session.
Asian currencies were mostly higher, with the Chinese yuan ticking higher as the country's economic growth beat forecasts.
There are "a few positives" for the rupee to begin the day with, a currency trader at a bank said.
However, "the big risk (U.S. President-elect Donald Trump) is now here" and "it's difficult to see" rupee recovering by much, he said. Trump's inauguration is on Jan. 20.
The rupee is down 0.7% since last Friday, heading for its eleventh straight weekly decline. Since Trump's election victory in early November, the rupee has slid nearly 3% amid near non-stop stress.
India's weak growth in the September quarter, expectations that the Reserve Bank of India may cut borrowing costs soon, and a central bank that seems more willing to allow the currency to depreciate have extenuated the rupee's plight.
The rally in oil prices to kick off 2025 has given investors one more reason to avoid the rupee.
Among the multiple headwinds, there was good news recently, with U.S. core inflation, retail sales and initial jobless claims data renewing hopes that the Fed may cut rates more than the two times that they projected in December.
Fed Governor Christopher Waller said three or four rate cuts this year are still possible if economic data weakens further.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.82; onshore one-month forward premium at 22 paisa
** Dollar index down at 108.92
** Brent crude futures up 0.4% at $81.6 per barrel
** Ten-year U.S. note yield at 4.61%; down 16 basis points this week
** As per NSDL data, foreign investors sold a net $508.3 mln worth of Indian shares on Jan. 15
** NSDL data shows foreign investors sold a net $61 mln worth of Indian bonds on Jan. 15
