Indian rupee may dip as fading bets of large Fed rate cut boost dollar
By Nimesh Vora
MUMBAI, Sept 10 (Reuters) -The Indian rupee is likely to open marginally weaker on Tuesday following a further recovery in the dollar amid falling odds of 50 basis points Federal Reserve rate cut next week.
The 1-month non-deliverable forward indicated that the rupee INR=IN will open at 83.96-83.97 to the U.S. dollar compared with 83.9550 in the previous session.
It "will be that kind" of a session where the dollar/rupee pair will be "well bid" without doing much, a currency trader at a bank said.
The pair "will remain married to 84" for now, he said, noting that the next important events are the U.S. August inflation and the Sept. 17-18 Fed meeting.
The odds that the Fed will opt for a 50 bps rate cut at that meeting are now down to 25% from nearly 40% prior to the U.S. non-farm payrolls report. FEDWATCH
While the August payrolls fell short of expectations, there was an improvement in the unemployment rate.
Overall, most economists reckoned that the highly anticipated report was not weak enough to push the Fed to deliver a larger rate cut. Helped by this, the dollar index =USD has recovered nearly 1% from recent lows.
Fed policymakers who spoke after the report too seem to have indicated their preference for a 25 bps reduction to begin the rate cut cycle.
Cutting rates too quickly could undermine the progress the Fed has made in moving inflation to their target, ANZ Bank said in a note.
ANZ expects the Fed to cut rates by 25 bps at each of their three remaining meetings this year and by a total of 200 bps over the cycle.
Asian currencies were mostly weaker while equities were mixed following a recovery on Wall Street. U.S. inflation data is on deck on Wednesday.
KEY INDICATORS:
** One-month non-deliverable rupee INRNDFOR= forward at 84.06; onshore one-month forward premium at 8.5 paise
** Dollar index =USD up at 101.66
** Brent crude futures LCOc1 up 0% at $71.9 per barrel
** Ten-year U.S. note yield at 3.71% ** As per NSDL data, foreign investors bought a net $231.5 mln worth of Indian shares on Sept. 6
** NSDL data shows foreign investors bought a net $29.3 mln worth of Indian bonds on Sept. 6
Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala
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