The Indian rupee is expected to come under pressure on Monday after US economic activity hit its highest level in more than two years, boosting demand for the dollar.
Non-deliverable futures indicate that the rupee will open slightly weaker against the US dollar from 83.5325 in the previous session.
The currency fell to an all-time low of 83.6650 last Thursday, largely due to outflows linked to Vodafone Group’s sale of its stake in Indian company Indus Towers.
“We can think that a new peak (for the dollar) will not be reached, at least this week,” said a bank foreign exchange trader.
The expectation of an increase in flows linked to the inclusion of Indian bonds in the JP Morgan index, as well as a central bank which “certainly will not want a significant movement” upwards on the dollar/rupee indicate that 83.66 is a safe bet, he said.
The dollar index and U.S. Treasury yields rose Friday, as the S&P said its June composite PMI, which tracks the manufacturing and services sectors, hit a 26-month high.
This has raised concerns about a potential delay in the Federal Reserve’s rate cut timetable, ANZ Bank said in a note.
Investors have forecast two interest rate cuts by the Fed this year, which is more optimistic than what policymakers reported at the last meeting.
U.S. core PCE data, due Friday, will provide guidance on the timing and magnitude of rate cuts. The May U.S. core PCE index, the Fed’s preferred inflation gauge, is expected to rise at a moderate pace of 0.1% month over month.
KEY INDICATORS: ** Rupee undeliverable in one month at 83.60; One-month onshore futures premium at 7.25 paisa ** Dollar index at 105.84 ** Brent crude futures dips to $85.12 ** Ten-year US note yield at 4.25% ** According to NSDL data, foreign investors have bought Indian stocks for a net value of $149mln on June 20.
** According to NSDL data, foreign investors bought $112 million worth of Indian bonds on June 20.
