Rupee closes higher as focus turns to Powell's remarks
By Jaspreet Kalra
MUMBAI, Aug 23 (Reuters) -The Indian rupee closed stronger on Friday, tracking gains in most Asian currencies, as investors awaited remarks from Federal Reserve Chair Jerome Powell, expected to shape market expectations for rate cutsin the world's largest economy.
The rupee INR=IN closed at 83.89 against the U.S. dollar, higher than its close at 83.9525 inthe previous session. The currency strengthened marginally week-on-week.
Most Asian currencies were higher by 0.1% to 0.7% while the dollar index held steady at 101.4.
With an interest rate cut already priced in for the Fed's September meeting, Powell's remarks will help investors determine whether the central bank will reduce rates by 25 or 50 basis points.
He is expectedto "indicate more confidence that the Fed will begin lowering rates from the next policy meeting in September, although a larger 50 basis pointscut will likely require further evidence of labour market deterioration," MUFG Bank said in a note.
The oddsof a 50 bps rate cut are currently at about 24%, according to CME's FedWatch tool.
Dovish remarks from Powell should help the rupee "slightly," but are expected to have more of an impact on dollar-rupee forward premiums, a trader at a foreign bank said.
The 1-year implied yield INRANPRM1Y=RR should "move towards 2.15%," if odds of a 50 bp cut rise after the remarks, the trader added. The 1-year implied yield was at 2.09% on Friday.
Despite positive global cues, strong dollar demand from local importers and outflows from local equities have kept a lid on the rupee's gains over recent sessions.
Overseas investors have withdrawn about $2.1 billion from Indian stocks over August so far, according to stock depository data.
Reporting by Jaspreet Kalra; Editing by Nivedita Bhattacharjee
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