MUMBAI, May 3 Reuters Indian rupee is expected to open higher on Wednesday, boosted by a broad decline on the U.S. dollar and plunge in yields amid worries over the U.S. banking sector.
Nondeliverable forwards indicate the rupee will open at around 81.7681.80 to the dollar compared to 81.88 in the previous session.
The rupee reached 81.7225 on Tuesday, before dollar bids by public sector banks, probably for the Reserve Bank of India, prompted it to reverse course.
At present, the downside on USDINR looks well protected at around the 81.6081.70 level, a spot trader said.
We will have to see if what the Fed does changes that. With what is happening with U.S. regional banks, we are more inclined to bet on a softer Fed tone and a weaker dollar.
The U.S. Federal Reserve will most likely raise rates by 25 basis points later in the day, interest rate futures indicate. Investors will be eyeing the U.S. central bank39;s forward guidance to assess the path ahead for interest rates.
While rate futures currently indicate an 88 probability of a rate hike, DBS Research reckons the odds of pause tonight are nonnegligible, more so if shares of U.S. banks take another meaningful leg lower.
Shares of U.S. regional banks plunged overnight after the weekend failure of First Republic Bank.
Investors could not shake off fears of a banking crisis after First Republic Bank became the third U.S. bank failure after Silicon Valley Bank and Signature Bank, DBS said.
U.S. equities declined…