The 1-month non-deliverable forward indicated the rupee will open at 83.60-83.62 to the U.S. dollar compared with 83.68 in the previous session. The rupee is on a four-day winning streak and is headed for its best weekly performance in at least four months.
After having spent considerable time just shy of the 84 handle, the dollar/rupee pair has witnessed a breakdown this week. This run up higher on the rupee is unlikely to extend much, according to traders
The dollar/rupee pair "is not the kind where breakdowns or breaks higher lead to much", a currency trader at a bank said.
"In fact it's been profitable more often than not to chase momentum and to bet that we will revert to the old range."
RISK RALLIES
A day after the Fed opted for a larger rate cut, the S&P 500 Index rallied 1.7% to an all-time high. Asian shares followed their U.S. peers higher and currencies advanced.
Investors are assigning a near 44% probability that the Fed will follow up this week's aggressive 50-basis-point rate cut with another of the same magnitude at the November meeting. Swaps are pricing in another 75 bps of rate cuts this year, which is more than the 50 bps that Fed policymakers have indicated.
Investors are wagering that concerns over the U.S. labour market will make the Fed cut interest rates faster than what officials have projected.
While its forecasts are broadly in line with what the Fed is indicating, "we certainly acknowledge that the jobs market outlook is more concerning" and the "risks are indeed skewed to the Fed having to do more, more quickly", ING Bank said in a note.
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