Rupee expected to open flat amidst Fed's rate warning

Rupee to open flat: The Rupee is expected to open flat against the US Dollar on Wednesday, following Federal Reserve Chair Jerome Powell's caution against cutting interest rates prematurely. Non-deliverable forwards suggest the Rupee will open near its previous session level of 83.4850 per dollar. Powell's comments led to muted reactions in Asian currencies.

"Powell's comments provided no new information, reinforcing the status quo on Fed rates," a currency trader from a bank remarked. The Rupee "will continue its familiar rangebound ways," with US inflation data due on Thursday being the next significant trigger, he added.

In his testimony to US lawmakers on Tuesday, Powell noted that while inflation has eased recently, it is not yet appropriate to cut rates until there is "greater confidence" that inflation is moving towards the 2 per cent target. His remarks aimed to maintain a neutral stance and struck a balanced tone, according to ANZ Bank. The bank highlighted that Powell's reference to elevated inflation as not the only risk implies a focus on weakening economic activity and labour market conditions.

Recent US economic data has been softer than expected, and there are signs of a cooling jobs market, with the unemployment rate rising to a 2-1/2-year high. Despite this, futures markets continue to price in two rate cuts by the Fed this year, unchanged from prior to Powell's testimony.

Powell's balanced approach and the lack of immediate changes in Fed policy have left market participants cautious. The Indian Rupee, along with other Asian currencies, remained steady, reflecting the uncertain global economic environment. Market watchers will be closely monitoring the upcoming US inflation data for further indications of the Fed's future actions.

(with Reuters inputs)