Indian rupee finds support from cooling Fed hike bets, unrelenting crude surge a drag

MUMBAI: The Indian rupee is likely to open little changed on Wednesday, as softer U. S. inflation data tempers expectations of a near-term Federal Reserve ​rate hike, offseting pressure from a continued rally in crude oil ‌prices. The Indian rupee is expected to open in the 96. 18-96. 22 range, per traders, having settled at 96. 20 on Tuesday. The rupee has come under significant pressure following renewed US-Iran hostilities, which has spurred ​a jump in oil prices. Brent crude was perched near $86 a barrel ​in Asia trading, well above the roughly $70 level seen just two ⁠weeks ago. Tuesday’s session underscored the rupee’s fragility, with the currency weakening past the ​96-per-dollar level despite dollar sales by the central bank in the spot and ​non-deliverable forward markets. The underlying bias on the rupee has turned considerably weaker over the last two sessions, a currency trader at a bank said. While higher oil prices are obviously part of the ​story, there appears to be more weighing on the rupee than just crude, “ ​he added. Good news on us inflation The rupee and other Asian currencies received relief from softer-than-expected U. S. ‌inflation data. ⁠Consumer prices rose less than forecast in June, prompting markets to scale back expectations of near-term Federal Reserve rate hikes. The probability of a 25-basis-point Fed rate increase at the July meeting fell to 16. 6% from 41. 7% a day before, per ​CME Group’s FedWatch tool. ​For September, markets ⁠priced in a 59. 8% chance of a hike, down from 75. 1% on Monday. Expectations of Fed hikes had strengthened in recent ​days amid the escalation in the Middle East conflict and ​the resulting ⁠rise in oil prices. The June inflation data, however, moderated those concerns and provided support for risk assets and Asian currencies. Surprisingly cool June inflation, slowing in core Personal Consumption ⁠Expenditures, and ​softer jobs data rule out a July rate ​hike, Citi Research said in a note. “We expect similar data in coming months will lead markets to ​price-out the chance of rate hikes altogether. ”

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