Rupee eyes steady start despite hawkish Fed, oil price dip offers relief

Rupee vs Dollar: The Rupee is expected to see a muted opening on Thursday, caught between a potential pullback in oil prices and ongoing concerns about elevated US interest rates.

Non-deliverable forwards indicate a slight change for the Rupee, opening near 83.52-83.54 per US dollar compared to Tuesday's close of 83.5350. Indian markets were closed on Wednesday.

A welcome decline in oil prices offered some relief to the Rupee. Brent crude witnessed its biggest daily drop on Wednesday, falling below $87.50 per barrel due to demand concerns outweighing ongoing tensions in the Middle East.

"There has been a decent pullback in oil and the dollar has cooled off, which is a sort of a relief for the Rupee," a forex trader commented. However, the trader also noted that "risk appetite remains weak due to the ongoing reassessment of Fed policy."

The Reserve Bank of India's (RBI) interventions have helped to limit volatility in the Rupee. "The RBI has ensured that we don't see huge moves at the open," the trader said.

Investors are now anticipating fewer interest rate cuts from the US Federal Reserve in 2024 due to persistent inflation. Recent comments from Fed Chair Jerome Powell and other officials indicate they are prioritizing inflation control, potentially keeping interest rates higher for longer.

Senior Fed officials have become more cautious in their outlook on future rate cuts, considering strong inflation data. ANZ Bank noted this shift in a recent report, with traders now expecting a potential delay in rate cuts from June to September.

While the dollar rally paused on Wednesday due to a slight easing in risk aversion, Asian currencies recovered modestly, with equities remaining mostly lower.

(With Reuters inputs.)