Anna 
The Indian rupee is anticipated to experience a slight decline at the opening on Tuesday, despite the positive performance of most Asian currencies in the wake of a U.S. inflation report reinforcing expectations of multiple rate cuts by the Federal Reserve in the coming year.
Non-deliverable forwards (NDFs) suggest that the rupee will open in the range of 83.18 to 83.20 against the U.S. dollar, compared to its previous close at 83.14 on Friday. Indian markets were closed on Monday.
A foreign exchange trader at a bank dismissed the indication of a lower opening for the rupee, stating that it reflects the prevailing directionless market sentiment. The trader remarked, “The dips (on USD/INR) have been bought into, and that may be it.”
Asian currencies collectively gained between 0.1% to 0.4% following Friday’s data, which revealed a decline in U.S. prices for the first time in over 3-1/2 years. This development pushed the annual increase in inflation further below 3%. The personal consumption expenditures (PCE) price index fell 0.1% month-on-month in November, while the core PCE measure increased.
According to Morgan Stanley, after Friday’s data, the required December monthly print to reach the Federal Reserve’s forecast for 2023 of 3.2% (Q4/Q4) is around 0.2% month-on-month. This data is likely to reinforce expectations that the Fed will not maintain current interest rates for an extended period.
Investors are currently pricing in a high probability of a rate cut in March, with an outlook for a total of 150 basis points in rate reductions throughout 2024. The 2-year U.S. Treasury yield dipped on Friday, marking its fifth weekly fall and dropping nearly 40 basis points in December. This trend has subdued demand for the dollar, resulting in a 1% month-to-date decline in the dollar index.
