Rupee to rise on muted reaction in Asia to Fed pushback; Budget in focus

The Rupee is poised to open slightly higher on Thursday following a relatively subdued response from its Asian counterparts to the Federal Reserve's resistance to March rate adjustments.

Forecasts from non-deliverable forwards suggest that the Rupee will initiate trading at 83.02 against the US dollar, a marginal uptick from the previous session's 83.0425.

According to an FX trader at a bank, Asian currencies have shown limited reaction to the Fed's stance, indicating potential momentum for the Rupee's upward movement at the opening bell.

The upcoming budget announcement at 11:00 am for the fiscal year commencing April 1 will be closely monitored, although expectations regarding its impact on the Rupee remain muted.

Following Federal Reserve Chair Jerome Powell's remarks expressing scepticism about March interest rate cuts, the likelihood of such a move has decreased to 1-in-3 according to FEDWATCH, down from 3-in-4 a month earlier. 

The shift is attributed to robust growth in the US economy and the resilience of its labour market.

While the dollar index experienced a dip, Asian currencies displayed a mixed performance. 

Despite reduced prospects of a March rate cut, Asian currencies found support from the decline in the 10-year US Treasury yield, which dropped below 4 per cent amid sell offs in US equities and weak private payroll data.

Looking ahead, market focus will centre on indicators such as the financial sector's performance, job market data, and inflation figures. 

Any signs of labour market weakness or sustained inflation stability could sway the Fed toward earlier rate adjustments, according to DBS Research.

(With Reuters Inputs)