Rupee to rise on dollar slide sparked by Fed autonomy concerns
The Indian rupee is likely to advance on Monday, tracking broad dollar weakness triggered by worries about the FederalReserve independence under U.S. President Donald Trump.
The 1-month non-deliverable forward indicated that the rupee will open at 85.15-85.20 to the U.S. dollar compared with 85.3675 in the previous session.
The rupee is not too far away from the recent high of 84.96 hit at the beginning of the month.
"The key thing to watch today is whether it (USD/INR) breaks below 85 and holds there," said a currency trader at a bank.
"If it (does), I expect exporters to step in quickly — especially considering how much pressure the dollar is under."
The dollar weakened more against its major peers and slipped versus Asian currencies on Monday, with the dollar index falling to around 98.28 on concerns about the Fed's independence.
The dollar index is now at its lowest in three years and has plunged 5.5% this month.
White House economic adviser Kevin Hassett said on Friday that the administration was still exploring whether it had the authority to dismiss Fed Chair Jerome Powell, sparking unease over political interference in U.S. monetary policy.
This came just a day after Trump said Powell's termination "cannot come fast enough", demanding that the Fed cut interest rates.
While analysts believe an outright removal of the Fed Chair remains unlikely due to legal constraints, MUFG Bank warned that any further steps in that direction could trigger significant market volatility and should be monitored closely.
The dollar had already been struggling prior to this due to investor concerns that President Trump’s aggressive tariff policies could dampen U.S. growth while stoking inflation.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 85.35; onshore one-month forward premium at 16.75 paise ** Dollar index down at 98.27 ** Brent crude futures down 1.8% at $66.8 per barrel ** Ten-year U.S. note yield at 4.34% ** As per NSDL data, foreign investors bought a net $470.1 million worth of Indian shares on Apr. 16
** NSDL data shows foreign investors sold a net $174.1 million worth of Indian bonds on Apr. 16
