The Indian rupee is expected to open largely unchanged on Wednesday, remaining below the 84 mark due to weak risk appetite and a slight pullback in the U.S. dollar.
The one-month non-deliverable forward indicates that the rupee will open at 84.04-84.05 against the U.S. dollar, compared to 84.0375 in the previous session. On Tuesday, the local currency experienced a minor relief, aided by dollar sell orders from public sector banks, likely on behalf of the central bank.
Typically, a drop past a significant level, especially one held for an extended period, can lead to increased volatility and further losses. However, this has not been the case for the rupee, which has remained relatively stable near the 84 mark after slipping below that level last Friday.
A complete lack of follow-through after breaking past 84 further reinforces the low-volatility environment we're experiencing," commented a currency trader at a bank.
The dollar index saw a slight decline, retreating from two-month highs. Asian currencies moved higher, supported by a drop in U.S. Treasury yields. A weak reading of manufacturing activity in New York State, coupled with a decline in U.S. equities, prompted investors to purchase U.S. Treasuries.
Asian equities followed Wall Street lower, which closed down on Tuesday as chip stocks fell and the energy sector dropped along with oil prices.
Investors are now nearly certain that the U.S. Federal Reserve will implement a 25-basis-point rate cut at its next meeting, down from the 50 basis points in September. Atlanta Federal Reserve President Raphael Bostic indicated he anticipates only one more interest rate reduction of 25 basis points this year, while investors are pricing in two rate cuts of 25 basis points each.
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The Indian rupee is expected to remain stable as the dollar pulls back, influenced by weak risk appetite and potential interest rate cuts from the Federal Reserve.
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