MUMBAI: The Indian rupee is expected to open nearly flat on Thursday as comforting US inflation data offset worries about an escalating global trade war that has hit risk appetite.
The 1-month non-deliverable forward indicated that the rupee will open at around 87.20-87.22, little changed from its close at 87.2075 in the previous session.
US consumer prices increased less than expected in February but analysts reckon that the relief may prove to be transient against the backdrop of aggressive tariffs on US imports.
Despite a softer than expected inflation print, traders reduced bets on rate cuts by the Federal Reserve this year and are now pricing in about 70 basis points of cuts in 2025, down from 76 bps on Wednesday.
“The Fed could remain patient with rate cuts while it seeks more clarity from (US President Donald) Trump’s trade and fiscal policies,” MUFG Bank said in a note.
Meanwhile, India’s retail inflation fell below 4% in February for the first time in six months, giving the central bank room to cut rates further in coming meetings.
While lower rates would conventionally be a drag on the rupee, if equity flows pick up as a consequence, it could actually bring some relief to the currency, a trader at a Singapore-based bank said.
Indian Rupee steady, forward premiums dip as traders await inflation prints
Persistent outflows from Indian stocks have been a sore point for the local currency.
Foreign investors have offloaded more than $16 billion of local equities so far in 2025. Asian currencies were mostly rangebound on Thursday while the dollar index was a tad lower at 103.5.
Uncertainty about US trade policies has blunted the dollar’s safe-haven appeal and the greenback has declined more than 3.5% against major peers in March.
American Dollar Exchange Rate