SPX

INDIA RUPEE-Rupee eyes Powell's testimony for cues on US interest rates

Credit: REUTERS/RUPAK DE CHOWDHURI

By Nimesh Vora

MUMBAI, March 6 (Reuters) - The Indian rupee is expected to open little changed on Wednesday on a drop in U.S. Treasury yields and weak risk before Federal Reserve Chair Jerome Powell's testimony to lawmakers.

Non-deliverable forwards indicate rupee INR=IN will open barely changed from 82.8950 in the previous session. The S&P 500 Index had its worst day in three weeks on Tuesday while the 10-year U.S. Treasury yield dropped to a one-month low.

The dollar index =USD briefly dropped below 103.60 in the New York session. Asian currencies were mostly rangebound.

"Count on a 3-4 paisa range today (for USD/INR). What direction Powell points to (on interest rates) will obviously be important," an FX trader at a bank said.

"Having said that, we all know that the bar for making the rupee is pretty high."

The rupee has been in a very narrow range for more than two weeks.

Powell's testimony to the Senate Banking Committee will be eyed for indications of when the Fed is likely to begin cutting interest rates. Fed officials have repeatedly signalled that they are in no hurry to cut interest rates and Powell is expected to maintain that.

"We expect him to lean hawkish and stick to the script he has been using since the January Fed meeting," ANZ said in a note.

Recent inflation data - the US January consumer inflation reading was higher than expected - point to Powell holding the stance that the Fed will proceed cautiously on rate cuts.

Ahead of Powell's testimony, data showed that the U.S. services industry grew in February. This follows the larger-than-expected contraction in U.S. manufacturing.

KEY INDICATORS:

** One-month non-deliverable rupee INRNDFOR= forward at 82.94

** Dollar index =USD at 103.80

** Brent crude futures LCOc1 up 0.1% at $82.1 per barrel

** Ten-year U.S. note yield at 4.16%

** As per NSDL data, foreign investors sold a net $1.4mln worth of Indian shares on Mar. 4

** NSDL data shows foreign investors bought a net $69.7mln worth of Indian bonds on Mar. 4

(Reporting by Nimesh Vora; Editing by Janane Venkatraman )

((nimesh.vora@tr.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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