The Indian rupee is expected to open higher on Monday, thanks to the fall in the US dollar and the likely unwinding of long positions in the run-up to the US presidential election.
The one-month non-deliverable futures contract indicates that the rupee will open at 84.04-84.06 per dollar, compared to its previous close of 84.0750.
Last week, the rupee moved within a narrow range of 3.5 paisa, largely due to repeated interventions by the Reserve Bank of India.
“We are definitely going to have a much wider range this week. The US elections and the Fed meeting are two important events,” said a bank forex trader.
The dollar index fell 0.2%, while Asian currencies rallied. The Chinese yuan, seen as a direct play on the November 5 US election, reached its highest level in two and a half weeks.
The dollar’s decline was likely spurred by a poll released over the weekend that sent Republican Donald Trump’s chances of winning the election plummeting. According to analysts, a Trump victory should give a boost to the dollar.
A high-profile poll released Saturday showed Vice President Kamala Harris leading Trump 47% to 44% in the state of Iowa, a turnaround from a September poll that gave Trump a lead by 4 points.
Mr. Trump won convincingly in Iowa in 2016 and 2020.
Prediction markets have tightened odds for the race over the past week, with “significant changes over the weekend,” bank MUFG said in a note.
As markets focus on the U.S. election, it’s important to keep the broader macroeconomic context in mind, MUFG said, highlighting the U.S. jobs report released Friday.
Meanwhile, the Federal Reserve is expected to cut rates by 25 basis points at its November 6-7 meeting.
KEY INDICATORS:
** One-month non-deliverable rupee forward exchange rate at 84.15; one-month onshore forward premium at 9.5 paisa.
** Dollar index down to 103.75
** Brent up 1.3% to $74.1 per barrel
** Ten-year US bond yield at 4.3120%.
** According to NSDL data, foreign investors sold $261.4 million worth of Indian stocks on October 30.
** According to NSDL data, foreign investors bought $50.9 million worth of Indian bonds on October 30.
