MUMBAI: The Indian rupee may open marginally higher against the US dollar on Monday, supported by a further uptick in Asian currencies after last week’s rally.
The rupee was likely to open at 81.25 per dollar compared with 81.3250 in the previous session.
The local currency last week jumped 1.7% on increased confidence that the US Federal Reserve was nearing an end to its rate-hike cycle.
In a research note last week, HSBC said that the Federal Reserve will likely hike its target interest rate for the last time at its Jan. 31-Feb. 1 monetary policy meeting, raising it by 50 basis points (bps) to a range of 4.75%-5.00%.
Markets have priced in a 25 bps hike on Feb 1 and another of the same size at the next meeting.
Mounting confidence on the Fed view will mean the dollar will remain out of favour, helping the rupee, a trader at a Mumbai-based bank said.
However, it was fairly obvious that rupee will not be repeating the kind of rally it saw last week, he said.
Indian rupee upside limited by low forward premiums
Portfolio outflows and likely decent support (for USD/INR pair) at 81 should keep rupee in check, he added. Foreign portfolio investors have taken out $1.8 billion from Indian equities so for this month and $116 million from debt.
Asian currencies carried forward the momentum from last week.
The offshore Chinese yuan climbed above 6.70 to the dollar for the first time since June. The Korean won and the Thai baht were up 0.7% each.
The Bank of Japan policy review on Wednesday will be a key event this week on expectations that the central bank could make further tweaks to its yield control policy.
The Japanese yen reached a seven-month high against the dollar.
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