MUMBAI: The Indian rupee is expected to open higher against the dollar on Thursday, after the US currency plunged on speculation that the Federal Reserve may slow the pace of its interest rate hikes.

The rupee was seen around 82.10-82.20 per dollar in initial trades, compared to its close on Tuesday of 82.7250.

Markets were closed on Wednesday for a local holiday.

The dollar index was at about 109.75, hovering near its lowest level in over a month.

The dollar gauge was at near 112 at the time when rupee over-the-counter (OTC) markets shut on Tuesday.

The “big correction on the dollar” will help rupee “have a really good start today”, a dealer at a Mumbai-based bank said.

“You would expect 82 to be a big support (for USD/INR pair) and there will be decent dollar buying interest there.”

The dollar’s decline has been fuelled by wagers that the weakening US economy may prompt the Fed to reassess the size of its rate hikes from next month.

The view that the Fed could begin to pivot in December was reinforced by weak US housing data this week, which showed that home prices and sales declined, adding to the case that the Fed’s attempts to slow down the world’s top economy was working.

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Treasury yields declined with the 10-year yield now at 4.02%, about 30 basis points off its recent highs.

Odds of a 75 basis point Fed rate hike in December have dropped to near 1-in-3 from about 75% a week back.

The Bank of Canada’s (BoC) policy decision also boosted expectations of a less hawkish Fed.

The BoC announced a smaller-than-expected 50-basis point rate hike on Wednesday and said future increases would be influenced by its assessment of how tighter policy was working to slow demand and ease inflation.