Rupee set for boost as dollar pulls back; attention turns to Fed officials

Rupee in focus: The Rupee is anticipated to exhibit a slightly positive trend on Wednesday, benefitting from a halt in the US dollar's upward momentum and a decrease in US Treasury yields.

Forecasts suggest that non-deliverable forwards indicate the rupee's opening at 83.02-83.04 against the US dollar, a slight decrease from the previous session's 83.0550.

Experts suggest that USD/INR will likely maintain a "marginally offered" stance at the outset and may persist throughout the day. According to a FX trader at a bank, the near-term range for USD/INR is firmly established between 82.80-83.20.

The dollar index experienced a decline from its nearly three-month peak, dropping to 104.08 in Asia, while the two-year US Treasury yield also decreased. 

The dollar's retreat follows a period of strength fueled by robust US economic data, leading investors to postpone expectations of the Federal Reserve's initial interest rate adjustment.

The likelihood of a rate cut at the upcoming meeting, which was at approximately 3-in-4 odds at the start of January, has now diminished to just 20 per cent. 

Consequently, the dollar index has risen by 2.7 per cent year-to-date. Asian currencies have experienced a collective decline of 1 per cent to 3.5 per cent this year, whereas the Indian rupee has displayed marginal growth during this timeframe. 

The rupee's stable volatility positions it as a standout performer during periods of dollar strength and a comparatively weaker performer during dollar downturns.

Market attention is currently fixated on indications regarding the future trajectory of US interest rates, with a particular focus on remarks from several Federal Reserve officials scheduled for this week. 

ANZ noted that it is improbable for the signalling to deviate from Fed Chair Powell's recent conference, as the Fed is inclined to await further evidence of an upturn in inflation before confidently achieving the 2 per cent inflation target sustainably.

(With Reuters Inputs)