Rupee awaits Powell's comments, US inflation after failure to breach $83.5

The Indian rupee is expected to struggle on Thursday after it was unable to move past the key resistance level of 83.50 and as traders eye comments from Federal Reserve Chair Jerome Powell for cues on the pace of US interest rate cuts.

The 1-month non-deliverable forward indicated that the rupee will open at 83.63-83.65 to the US dollar compared with 83.5925 in the previous session.

In each the last three sessions, the rupee has been unsuccessful in climbing past 83.50, a level which market participants say is important for the currency to take out to sustain its upward momentum.

 

"Most think that 83.40-83.50 will be very difficult (for the dollar/rupee) pair to break and the recent price action has validated that," a currency trader at a bank said.

The rupee's cause will not be helped considering that the "enthusiasm" in the Asia FX space on account of the China stimulus had "dimmed somewhat", he said.

The trader expects the rupee to drift lower to 83.75, the middle of its recent trading range, over the next few sessions, ,

25 BPS OR 50 BPS

Comments from Fed Chair Powell and other key Fed officials later in the day will be scrutinized for cues on what the central bank's next move is likely to be after it delivered a 50-basis-point cut last week.

The swap market is pricing in slightly higher odds of a follow up 50-bps rate cut at the Fed's next meeting in November than that of a smaller 25-bps reduction.

The Fed's focus is right now more on the US labour market and less on inflation, which is what is prompting traders to bet on a larger cut.

US jobless claims data due on Thursday will be eyed for cues on how the labour market is faring. The US core PCE index, the Fed's preferred inflation, out on Friday, will indicate whether price pressures remain comfortable.