The Indian rupee is expected to weaken and halt its three-day winning streak against the US dollar. Non-deliverable forwards suggest that the rupee will open at around 82.62-82.64 to the dollar, compared with 82.5725 in the previous session. The rupee had reached a three-week high of 82.3625 on Thursday but has since dropped back below 82.50. The dollar index rallied 0.6% on Thursday and continued to rise in the Asian session, reaching its highest level in two-and-a-half months. Investors are closely watching Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium for indications on interest rate hikes and his view on the recent sell-off in US Treasuries.
The decline in US equities, the rise in US Treasury yields, and strong US labour market data have all contributed to the rally of the dollar index. This has put downward pressure on the rupee. The majority view is that Powell will take a cautious approach to further tightening and will base his decisions on the overall data before committing to additional rate hikes. Powell’s speech will be closely scrutinized by investors, as it will provide insights into the future of US monetary policy.
In financial markets, the one-month non-deliverable rupee forward is trading at 82.72, while the onshore one-month forward premium stands at 8.25 paisa. The USD/INR NSE August futures settled at 82.5750 on Thursday, and the August forward premium is at 1.25 paisa. The dollar index is currently at 104.16, Brent crude futures are up 0.4% at $83.7 per barrel, and the ten-year US note yield is at 4.25%. Foreign investors purchased a net $108.7 million worth of Indian shares on August 23, according to NSDL data, while they bought a net $8.8 million worth of Indian bonds on the same day.
In summary, the Indian rupee is expected to weaken against the US dollar after reaching a three-week high. The dollar index has been rallying due to a decline in US equities, rising US Treasury yields, and strong labour market data. Investors are closely watching Federal Reserve Chair Jerome Powell’s speech for insight on interest rate hikes and his view on the recent sell-off in US Treasuries. The rupee’s depreciation is in line with the rally of the dollar index, and Powell’s speech will be a significant factor in determining future USD/INR movements.