The Indian rupee is expected to open largely unchanged on Monday, supported by expectations that the country's central bank will again intervene to offset the impact of a stronger dollar and a rise in US Treasury yields.
The one-month non-deliverable futures contract indicates that the rupee will open almost unchanged from the previous session's 84.08, approaching a record high of 84.0825.
The rupee “barely moved, opening flat then doing absolutely nothing” throughout last week, and “I don't see any reason for things to be any different (this week),” said a foreign exchange trader at a bank.
“It's just baffling that the RBI (Reserve Bank of India) is determined to hang on at this level. I can understand why they don't want volatility, but this is overkill.”
Throughout the last week, the rupee remained in a 3 paisa range, due to the RBI's persistent intervention in the face of capital outflows and dollar optimism.
The dollar index rose 0.8% last week, recording its fourth weekly gain, boosted by the resilience of the US economy and the prospects of Donald Trump's victory in the US presidential elections. The 10-year US Treasury yield is at its highest level since mid-July.
The dollar index rose further on Monday, largely thanks to the fall in the Japanese yen after the country's ruling coalition lost its parliamentary majority, which investors said would slow future rate hikes. 'interest.
At the same time, oil prices fell, which is good news for the rupee, after Israel's weekend attack on Iran bypassed oil or nuclear targets.
“The Israeli attack on Iran on Saturday was limited to missile and air defense sites, and was more subdued than many expected,” MUFG Bank said in a note.
KEY INDICATORS:** Rupee undeliverable in one month at 84.18; One month forward premium in the domestic market at 10 paise.
** Dollar index up to 104.50
** Brent down 4.4% to $72.7 per barrel
** Ten-year US bond yield at 4.28%.
** According to NSDL data, foreign investors sold $575.3 million worth of Indian stocks on October 24.
** According to NSDL data, foreign investors sold $30.4 million worth of Indian bonds on October 24.
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