Indian rupee seen flat as traders eye guidance on U.S. rates

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MUMBAI — The Indian rupee is tipped to open little changed to the dollar on Friday, as traders awaited a speech by Federal Reserve Chair Jerome Powell to see how aggressive the central bank would be in its battle against inflation.

The rupee is expected to open almost at the same level as Thursday’s close of 79.88. In the previous three sessions too, the rupee had opened barely changed.

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The realized volatility on the local currency, measured in terms of the daily close-to-close over last 10 days, has dropped to a one-month low.

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The overnight risk “has simply disappeared” as it looks like that traders “have little appetite” right now to take the rupee below 80, a spot currency dealer at a Mumbai-based bank said.

“We think the balance of risks remains loaded in favor of a sizeable move lower below 80 for the rupee. Powell’s speech today could be the trigger.”

Powell will speak at a conference of global central bankers in Jackson Hole, Wyoming, later on Friday and is expected to reiterate that the Fed remains focussed on bringing down runaway inflation. His comments are keenly awaited for clues on the pace of rate hikes.

Powell’s comments will sway market debate on whether the Fed will raise rates by 50 basis points or 75 basis points next month. Bets of a 75-bp rate hike had eased following softer-than-expected U.S. July inflation data, but have moved back above 50% amid hawkish comments from Fed policymakers.

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Asian currencies traded mixed on Friday while risk appetite was fairly upbeat. Equity gauges rose in the region after the S&P 500 index climbed 1.4% overnight in its best session in almost two weeks.

The dollar index was hovering near 108.50.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 80.12; onshore one-month forward premium at 21.5 paise ** USD/INR NSE August futures closed on Thursday at 79.91 ** USD/INR forward premium as of Aug. 25 for end current month is 0.3 paise ** Dollar index up at 108.51 ** Brent crude futures up 1% at $100.3 per barrel ** Ten-year U.S. note yield at 3.05%, India 10-yr bond yield at 7.29% ** SGX Nifty nearest-month futures up 0.6% at 17,690 ** As per NSDL data, foreign investors bought a net $21.1 mln worth of Indian shares on Aug. 25

** NSDL data shows foreign investors sold a net $39.2 mln worth of Indian bonds on Aug. 25

(Reporting by Nimesh Vora; Editing by Subhranshu Sahu)