The Indian rupee is expected to be steady at the open on Tuesday and may look to make slight gains throughout the session as the dollar's post-US election rally shows signs of running out of steam after hitting its highest level in one year last week.
The one-month non-deliverable futures contract indicates that the rupee will open at 84.38-84.39 to the US dollar, little changed from its close of 84.3850 in the previous session.
The local currency fell to its lowest level of 84.4125 last week.
The dollar index was at 106.2 after falling 0.4% on Monday, its second straight daily decline, likely due to profit-taking after it hit a one-year high of 107, 07 last week.
“We expect USD/INR to fall, following the general dollar weakness, but not by much,” said a foreign exchange trader at a private bank.
The trader expects the dollar/rupee pair to find immediate support at 84.35-84.36 due to demand for covering from importers.
Asian currencies were generally stronger on the day, led by the Indonesian rupiah, which rose 0.3%.
At the same time, the Indian government is likely to extend the tenure of Reserve Bank of India (RBI) Governor Shaktikanta Das for a second time, Reuters reported earlier.
An extension of Mr Das' tenure is expected to mean that the RBI's “aggressive intervention in the foreign exchange market is likely to continue for the time being, implying that USD/INR volatility is likely to be limited”, MUFG Bank said in a note.
Regular interventions by the Indian central bank supported the rupee for over a month, as the currency came under pressure due to sustained portfolio outflows and a rise in the dollar index and US bond yields after the American election.
Foreign investors have withdrawn $3.3 billion from Indian stocks and bonds on a net basis in the month of November so far, adding to the outflow of $11.4 billion in the previous month .
KEY INDICATORS:
** Non-deliverable one-month rupee forward exchange rate at 84.50; one month onshore forward premium at 11.50 paisa.
** Dollar index at 106.2
** Brent up 0.1% to $73.4 per barrel
**The yield on US ten-year bonds is 4.41%.
** According to NSDL data, foreign investors sold $176.9 million worth of Indian stocks on November 14.
** According to NSDL data, foreign investors bought $20.6 million worth of Indian bonds on November 14.
