The Indian rupee is likely to open higher on Wednesday as expectations that the U.S. Federal Reserve will not raise interest rates further diminished demand for the dollar.
Non-deliverable forwards indicate rupee will open at around 83.18-83.20 to the U.S. dollar compared with 83.2450 in the previous session.
The dollar index was down to 105.74 and the Korean won led Asian currencies higher. Brent crude was hovering near $88 per barrel.
"After the initial jump following the Israel conflict, oil has been more or less quiet, which is good for the rupee," a forex spot trader at a public sector bank said.
"In line with Asia, there will be a slightly offer-ish tone (on USD/INR) at open, following which it should be rangebound."
The dollar index has struggled since reaching a year-to-date high of 107.34 last Tuesday. U.S. Treasury yields, both near and far maturities, have similarly witnessed a pullback.
That has been largely attributed to indications that by Fed officials that more rate hikes may not be needed. A number of policymakers have suggested that the jump in long maturity Treasury yields has reduced the need to raise the policy rate further.
It's "possible" that the recent rise in yields on longer-term Treasuries means the Fed need not raise interest rates as much as otherwise, but it's hard to know definitively, Minneapolis Fed President Neel Kashkari said on Tuesday.
Atlanta Fed President Raphael Bostic outright said the U.S. central bank need not raise borrowing costs any further.
Minutes of the Fed's September meeting are due during U.S. trading hours Wednesday.
