The Indian rupee is expected to open little changed on Monday, after hitting an all-time low in the previous session, and may post modest gains after the dollar retreated from a two-year high in light of US inflation lower than expected.
The one-month non-deliverable futures contract indicates that the rupee will open towards 85.02-85.03 to the US dollar compared to its close at 85.0150 in the previous session.
The rupee fell to its all-time low of 85.10 early Friday, but recovered slightly late in the day on the back of dollar inflow.
With global indices on the positive side for the rupee, on Monday it may be difficult for it to sustain significant gains above 85 in the face of month-end bids from dollar importers, said a trader at a state bank.
The Dollar Index was at 107.7 after falling 0.5% on Friday following data that showed the U.S. personal consumption expenditures price index rose 0.1% in November, less than the 0.2% increase anticipated by economists.
The Dollar Index is on course for an annual gain of more than 5%, boosted by a hawkish shift in the Federal Reserve's interest rate outlook and anticipation that the incoming Trump administration's policies in the United States could be inflationary.
Asian currencies were mostly higher on the day, with the Malaysian ringgit rising 0.6% and leading the gains, while the Chinese offshore yuan dipped 0.1%.
“We could still see dollar buying calm down as we enter the quiet Christmas and year-end period. There is certainly an increased risk of seeing some easing in positioning before the end of the year.” , MUFG Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee futures contract at 85.21; One-month forward premium in the domestic market at 19 paisa.
** Dollar Index down to 107.7
** Brent up 0.5% to $73.3 per barrel
** Ten-year US bond yield at 4.53%.
** According to NSDL data, foreign investors sold $93.2 million worth of Indian stocks on December 19.
** According to NSDL data, foreign investors bought $18.7 million worth of Indian bonds on December 19.
