Rupee range to hold with US inflation test on the horizon
The Indian rupee is expected to be largely range-bound on Thursday, with traders staying put amid muted momentum and in the lead up to key U.S. inflation data that could steer expectations for the Federal Reserve’s rate cut next week.
The one-month non-deliverable forward pegged the rupee to open near 88.10, unchanged from Wednesday, with moves seen capped at 5–7 paisa on either side.
"The rupee is basically stuck where it is, and the price action tells you it wants to stay that way," a Mumbai-based FX trader said.
"The U.S. inflation data will decide the short-term direction for the dollar; however, I don’t think it can push the rupee too far away from 88," a Mumbai-based FX trader said.
The rupee has been unable to sustain moves past the 88 level due to persistent dollar demand, likely driven by the U.S. tariff overhang, which has capped the upside.
On the other hand, declines past 88 have lacked momentum, keeping the currency boxed in. While the rupee hit a record low of 88.36 last Friday, the price action has been broadly subdued since then with little follow-through.
ASIA WEAK, FOCUS ON US INFLATION
Asian currencies logged small losses on Thursday while the dollar index inched higher, with investors eyeing the consumer U.S. inflation data, due later in the day. A Reuters poll of economists expects August core inflation to rise 0.3% month-on-month.
The inflation reading will land at a time when markets are fully pricing a 25-basis-point rate cut from the Federal Reserve next week amid worries over the labour market. Analysts say a larger move cannot be ruled out if the data backs it.
"A benign inflation report could open the prospect of a 50 basis points cut," Chris Weston, head of research at Melbourne-based broker Pepperstone, said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.22; onshore one-month forward premium at 12.5 paise
** Dollar index up at 97.84
** Brent crude futures down 0% at $67.5 per barrel
** Ten-year U.S. note yield at 4.05%
** As per NSDL data, foreign investors bought a net $64.8 million worth of Indian shares on September 9
** NSDL data shows foreign investors sold a net $47.5 million worth of Indian bonds on September 9
