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Updated January 4th, 2024 at 08:58 IST

Rupee evaluates dollar's strong comeback amidst risk concerns, fund movements

Non-deliverable forwards suggest a marginal shift from the previous session's 83.2750 level.

Reported by: Business Desk
Rupee
Rupee | Image:Unsplash
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Rupee in focus: The Rupee is expected to open relatively unchanged on Thursday, influenced by the US dollar's notable recovery, declining equity markets, and overall fund flows. 

Non-deliverable forwards suggest a marginal shift from the previous session's 83.2750 level.

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The start of 2024 has seen a distinct shift in the dynamics for the US dollar and risk sentiment, according to a forex trader.

The dollar's notable recovery is likely to attract interest from USD/INR buyers. However, portfolio inflows are anticipated to slow down compared to the robust pace observed in December, potentially preventing unexpected dips in USD/INR.

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The US dollar index reached a more-than-two-week high, supported by a weakened risk appetite. 

US equities continued their downward trend, with the S&P 500 Index experiencing a 1.8 per cent decline over three days. The 10-year US bond yield briefly surpassed 4 per cent before retracting.

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Following a strong rally in December, both US bonds and equities have encountered challenges, attributed to a mild pullback in expectations regarding Federal Reserve rate cuts. 

Market indicators now suggest a 29 per cent probability that the Fed will maintain the policy range of 5.25 per cent to 5.5 per cent at its March policy meeting, up from under 10 per cent a week earlier, as per CME's FedWatch Tool. 

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Additionally, investors are currently pricing in less than 150 basis points of rate cuts for the year.

Fed Minutes 

The minutes of the December Fed meeting highlighted progress in inflation and reinforced expectations that the Fed policy rate may have peaked. 

The minutes also expressed concerns about keeping interest rates too high for an extended period, aligning with Fed Chair Jerome Powell's comments during the December press conference. 

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Goldman Sachs characterised the comments in the minutes as dovish, particularly regarding inflation progress and the risks of maintaining high rates for an extended duration.

(With Reuters Inputs)

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Published January 4th, 2024 at 08:58 IST

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