Rupee looks to build on modest momentum on trade deal hopes, Fed rate cut bets
The Indian rupee will look to build on the modest momentum from the previous session on Wednesday, aided by optimism over a potential U.S.-India trade deal and U.S. data that made it more likely that the Federal Reserve will cut rates again next month.
The 1-month non-deliverable forward indicated the rupee will open marginally higher-to-flat versus the U.S. dollar, against 88.5675 on Tuesday, when it inched up 0.14% supported by a late-afternoon rally.
The rupee initially showed a muted reaction to positive remarks from U.S. President Donald Trump on the U.S.-India trade deal, with sentiment improving later in the session alongside a move higher in local equities.
"There was sort of a tentative shift (in rupee’s favour) late yesterday — feels like it finally got some traction," a currency trader at a private bank said.
"The thing is that dips (on dollar/rupee) have been finding good buyers, though I sense that could start to soften a touch."
It may be a session that could set the tone for a "tradable" rupee rally, he added.
US JOBS DATA SUPPORTS RATE CUT
Payrolls processor ADP reported that U.S. companies cut over 11,000 jobs a week through late October, suggesting a further cooling in the labour market that is being closely watched by the Federal Reserve.
Odds of a Fed rate cut at the December meeting ticked higher after the weak data.
ADP’s payroll figures are among the private-sector indicators policymakers have relied on in place of official labour data unavailable during the ongoing U.S. government shutdown.
The shutdown is expected to end in the coming days. Members of the House of Representatives are set to vote on a measure that would restore funding to federal agencies and end the shutdown that began on October 1.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.68; onshore one-month forward premium at 13.75 paise
** Dollar index up at 99.54
** Brent crude futures down 0.2% at $65 per barrel
** Ten-year U.S. note yield at 4.08%
** As per NSDL data, foreign investors sold a net $567.8 million worth of Indian shares on Nov. 10
** NSDL data shows foreign investors sold a net $12 million worth of Indian bonds on Nov. 11
