The Indian rupee is expected to open roughly unchanged on Tuesday, holding near its all-time low, with the dollar hitting its highest level in more than two months.
Falling oil prices as well as expectations of intervention from the Reserve Bank of India are likely to counter the rise in the dollar.
The one-month non-deliverable futures contract indicates that the rupee will open almost unchanged from the previous session’s 84.06. The currency hit a lifetime low of 84.0750 on Monday.
The dollar index hit 103.36 on Monday, its highest level in more than two months. Asian currencies were lower, with the Chinese yuan weakening to 7.11 per U.S. dollar and the Japanese yen nearing 150.
The dollar index is now more than 3% higher than its recent lows, following changing expectations about the size of the Federal Reserve’s next interest rate cut. Investors discounted the likelihood of another 50 basis point cut after the release of a strong US jobs report.
The dollar is firm, with expectations for a Fed rate cut remaining muted, said Srinivas Puni, managing director at QuantArt Market Solutions.
“USD/INR is hovering around the 84 zone, with no real upward momentum.
The RBI made it clear that the rupee’s weakening beyond 84 did not mean it was ready to relax its grip on the currency, traders said.
U.S. jobless claims data, due Thursday, is the next key data that market participants are watching as the Fed focuses on the jobs market.
OIL PRICE, STOCK FLOWS
Oil prices fell in Asian trading, with Brent crude now down more than 7% from last week’s peak. A media report that Israel is prepared not to strike Iranian oil targets has prompted investors to dump oil futures.
At the same time, foreign capital outflows from Indian stocks continued, with month-to-date sales approaching $8 billion.
KEY INDICATORS:
** One-month non-deliverable rupee forward exchange rate at 84.18; One-month forward premium in the domestic market at 12.5 pairs of rupees.
** Dollar index up to 103.19
** Brent down 2.9% to $75.2 per barrel
** Ten-year US bond yield at 4.10%.
** According to NSDL data, foreign investors sold $479.6 million worth of Indian stocks on October 11.
** According to NSDL data, foreign investors sold $120.8 million worth of Indian bonds on October 11.
