INDIAN RUPEE – Rupee may get relief from falling US yields ahead of inflation data

INDIAN RUPEE – Rupee may get relief from falling US yields ahead of inflation data
INDIAN RUPEE – Rupee may get relief from falling US yields ahead of inflation data

The Indian rupee will likely be comforted on Wednesday by a fall in US Treasury yields ahead of key US inflation data that will provide guidance on the Federal Reserve’s interest rate path this year.

Non-deliverable futures indicate that the rupee will open marginally higher against the US dollar, from 83.51 in the previous session.

The rupee has remained in a tight range for the past few days, hovering around the 83.50 mark. A handful of traders believe the Reserve Bank of India aligned dollar bids on the interbank order matching system to prevent the rupee from sliding to an all-time low of 83.5750.

“I can understand that because of the RBI, it is difficult to go beyond 83.50 for USD/INR. However, how come the declines are also practically non-existent?” said a bank currency trader.

“It will be another day with nothing.”

The 10-year U.S. Treasury yield fell to 4.44% and the dollar index slipped below 105 ahead of U.S. consumer inflation data. Economists polled by Reuters expect the core consumer price index to rise 0.3% month-on-month in April.

U.S. stocks rose Tuesday and S&P 500 index futures were higher in Asia.

Ahead of the consumer inflation release, data showed that U.S. producer prices rose more than expected in April. However, the March figures were revised to show a decline of 0.1% compared to an increase of 0.2%.

Fed Chairman Jerome Powell said April’s producer price report was more “mixed” than “hot” given that earlier data was revised lower as data from April were higher than expected.

US consumer inflation figures will tell us whether the country has taken further steps in the process of disinflation, or whether prices remain too sticky for the Fed to taper, ING bank said .

“This last hypothesis seems the most probable.

KEY INDICATORS: ** One-month undeliverable rupee forward exchange rate at 83.56; one month onshore forward premium at 8 paisa.

** Dollar index down to 104.96 ** Brent up 0.6% to $82.9 a barrel ** US ten-year bond yield at 4.44%.

** According to NSDL data, foreign investors sold $525.9 million worth of Indian stocks on May 13.

** According to NSDL data, foreign investors sold $113.1 million worth of Indian bonds on May 13.

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