MUMBAI, April 26 (Reuters) – The Indian rupee is expected to open little changed on Friday, despite a pick-up in U.S. inflation which spurred a rise in U.S. Treasury yields and further reduced the likelihood of imminent Federal Reserve rate cuts.
Non-deliverable forwards indicate the rupee will open at 83.30-83.32 to the U.S. dollar, compared with its close of 82.3150 in the previous session.
The losses in other Asian currencies were moderate, with most down just about 0.1%.
I “would have thought that Asia would be under a lot of stress. However, that has not happened, making it a dull opening,” a currency trader at a bank said.
The dollar/rupee pair “is now in a phase” where dips to 83.20-83.25 will find buyers, while 83.40 will bring in sellers, he said.
The 10-year U.S. yield rose to the highest since November and the 2-year yield topped 5% on Thursday after data showed that a measure of inflation rose more than expected.
The core PCE rose by 3.7% in the first quarter, above expectations of a 3.4% increase.
The data “implies upside risks to” the monthly core PCE deflator and makes a near-term Fed rate cut all the more less likely, ING Bank.
The March core PCE index, due later in the day, is forecast to rise 0.3% month-on-month.
“Assuming no revisions in January and February, this quarterly print implies a monthly core PCE inflation rate for March of 0.48%, well above our prior expectations,” Morgan Stanley said in a note.
The odds of a Fed rate cut in July is down to 1-in-3 and investors are pricing in just 35 basis points of total cuts this year.
It was higher inflation that caught the market’s eye, rather than weaker growth, ING Bank said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 83.38; onshore one-month forward premium at 7.25 paisa
** Dollar index little changed at 105.60
** Brent crude futures up 0.3% at $89.3 per barrel
** Ten-year U.S. note yield at 4.7%
** As per NSDL data, foreign investors bought a net $507.5 million worth of Indian shares on April 24
** NSDL data shows foreign investors sold a net $384.1 million worth of Indian bonds on April 24
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Reporting by Nimesh Vora; Editing by Savio D’Souza
Our Standards: The Thomson Reuters Trust Principles.
