MUMBAI: The Indian rupee is expected to open higher versus the US dollar on Wednesday, helped by a Chinese yuan-led advance in Asian currencies.
The non-deliverable forwards indicate the rupee will open at around 82.54-82.58 to the US dollar, compared with 82.6650 in the previous session.
The offshore yuan rose above 6.94 to the dollar, while other Asian currencies were up 0.1% to 0.3%. The yuan had fallen to near 6.99 on Monday on concerns over the US inflation outlook.
The yuan’s recovery alongside the “non-yielding” of the 82.90-83 levels is pushing the rupee to the higher side of its range, a currency trader at Mumbai-based bank said.
The rupee will now have to contend with the support (on USD/INR pair) near to the 82.50 level, which will be “difficult to infringe,” the trader said.
Beyond the yuan, other cues for the rupee were negative. The 2-year US yield was up at 4.84%, the dollar index was at 104.98 and India’s GDP data disappointed.
Data released late Tuesday revealed that India’s economy recorded year-on-year growth of 4.4% in October-December, down from 6.3% in July-September and below the 4.6% reading expected by economists polled by Reuters.
“The moderation in year-on-year GDP growth reflects less supportive base-effect,” IDFC First Bank said in a note.
Indian rupee gains as risk assets find relief in dollar pullback
“From a monetary policy perspective, the GDP print is unlikely to change the RBI’s (Reserve Bank of India’s) focus from tightening policy, as growth was in line with RBI’s estimate.”
Meanwhile, the focus is on the US ISM manufacturing data due later in the day and services print on Friday for cues on the current US Federal Reserve interest rate cycle.
Futures pricing currently suggests a peak of around 5.4% in the Fed funds rate by September.
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