INDIAN RUSPEE – The rupee should benefit from central bank support at 83.50-83.55/USD

INDIAN RUSPEE – The rupee should benefit from central bank support at 83.50-83.55/USD
INDIAN RUSPEE – The rupee should benefit from central bank support at 83.50-83.55/USD

The Indian rupee is expected to open little changed Tuesday on continued demand for the dollar and bets that the central bank will not allow the currency to slide to an all-time low.

Non-deliverable futures indicate that the rupee will open almost unchanged from 83.4875 in the previous session. Traders cited dollar demand from oil companies and daily corporate outflows as reasons for the continued pressure on the rupee on Monday.

“The demand (in dollars) and the lack of interest in selling are very visible in the price development. Only real demand will be present at the current level, knowing that the RBI (Reserve Bank of India) will probably want to maintain 83 .50-83.55,” said a bank foreign exchange trader.

The rupee has been moving in a range of around 83.35-83.50 over the last few sessions.

Asian markets remained expectant in the absence of US data. US yields remained calm, with the 10-year rate near 4.50% and the dollar index at 105.20.

This week, attention is focused on a series of Federal Reserve speakers ahead of the release of US inflation data, scheduled for next Wednesday. Investors face uncertainty over the Fed’s interest rate outlook.

On the one hand, the last three digits of inflation have been higher. On the other hand, recent headline US data was weaker than expected – employment figures rose less than expected and manufacturing and services activity contracted last month, surveys showed.

Against this backdrop, ING bank said it was sticking to its call for a Fed rate cut in September.

“For that, we think you need at least three prints of core inflation of 0.2% or less month-on-month and an unemployment rate above 4%, with slightly more evidence of a slowdown in growth in consumer spending,” ING said in a note.

KEY INDICATORS: ** Rupee undeliverable in one month at 83.55; One-month onshore forward premium at 8.25 paisa ** Dollar index at 105.17 ** Brent up 0.2% to $83.5 a barrel ** US ten-year bond yield at 4. 49

** According to NSDL data, foreign investors sold $256.4 million worth of Indian stocks in May. 3

**NSDL data shows foreign investors bought $98.3 million worth of Indian bonds on May 3. 3

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