The Indian rupee is expected to open flat on Tuesday, due to the weakness of its Asian counterparts on the one hand and a central bank that does not want the currency to fall to a historic low on the other.
Non-deliverable futures indicate that the rupee will be virtually unchanged from the previous session’s 83.5050.
The dollar was significantly outbid, following strong US jobs data that diminished the Federal Reserve’s chances of cutting interest rates later in the year. Asian currencies fell 0.1% to 0.3%.
The Fed’s two-day policy meeting begins later today, after which it is expected to leave its key rate unchanged. The Fed’s dot plot is expected to shift higher, with policymakers planning fewer rate cuts this year than before.
The Fed’s decision is expected during U.S. trading hours on Wednesday, preceded by U.S. consumer inflation figures for May.
“You have two important things tomorrow from the perspective of the short-term direction of the dollar,” said a bank currency trader.
The rupee “between now and then should basically see narrow intraday movements with 83.50 as the central point,” he said.
The rupee is not far from the all-time low of 83.5750 reached in April. The Reserve Bank of India has been steadily selling dollars near 83.50 to defend the local currency, traders said.
Ahead of May’s US inflation data, the one-year inflation forecast of consumers surveyed in New York fell to 3.17% in May, from 3.26% in April.
That will come as “some relief” given that other measures of inflation expectations have shown signs of rising recently, ING bank said in a note.
KEY INDICATORS: ** One-month rupee not deliverable forward at 83.56; One-month onshore forward premium at 6.25 paise ** Dollar index at 105.14 ** Brent down 0.3% at $81.4 a barrel ** US ten-year bond yield at 4. 45%.
** According to NSDL data, foreign investors purchased $642 million worth of Indian stocks on June 7.
** According to NSDL data, foreign investors bought $154.7 million worth of Indian bonds on June 7.
