Anna 
The Indian rupee is poised to open stronger on Monday, benefiting from a decline in U.S. Treasury yields following comments by Federal Reserve Chair Jerome Powell and recent state election victories for India’s ruling party.
Non-deliverable forwards suggest that the rupee will likely open at approximately 83.23-83.24 against the U.S. dollar, compared to its Friday close at 83.2875.
“With state election results in favor of the central ruling party, the rupee should open higher… however, dip-buying interest (on USD/INR) may emerge near 83.20,” noted a foreign exchange trader at a private bank.
Prime Minister Narendra Modi’s Bharatiya Janata Party secured victories in three of the five Indian states that recently underwent elections. Analysts, including MUFG Bank, consider these election results positive for equity inflows, potentially alleviating some pressure on the rupee for depreciation in the near term.
U.S. Treasury yields experienced a decline on Friday following optimistic comments from Fed Chair Jerome Powell, who suggested that the current policy rate may be sufficient to combat inflation. Powell emphasized the Federal Open Market Committee’s cautious approach, recognizing the need to balance the risks of under- and over-tightening.
The 10-year U.S. Treasury yield inched up in Asia after reaching a low of 4.19% on Friday, marking its weakest level since early September. Market expectations have shifted, with Fed futures now pricing in a 60% chance of a rate cut at the Fed’s March meeting, a notable increase from 21% just over a week ago, according to the CME’s FedWatch tool.
While most Asian currencies experienced slight gains, the dollar index showed a marginal increase to 103.28.
Looking ahead, investors are anticipated to closely monitor U.S. economic data throughout the week for further insights into Fed policy. Additionally, attention will be directed toward the Reserve Bank of India’s policy decision scheduled for Friday, as market participants seek clarity on the central bank’s stance amidst evolving global economic conditions.
