MUMBAI: The Indian rupee is likely to struggle on Wednesday, pestered by foreign outflows from the country’s equity markets as well as weakness in its Asian peers.
Non-deliverable forwards indicate the rupee will open slightly weaker to the US dollar from its close of 83.15 in the previous session.
It is “likely to be that kind of a day” in which “we will see minimal moves”, an fx trader said.
“The bias, I would say, is marginally on the upside (for the USD/INR), taking into account recent price action and the flow picture and order book.”
Foreign investors have taken out $2.8 billion from Indian equities from last Wednesday to Saturday, data from the National Securities Depository shows.
The provisional data for Tuesday’s session, put out by the BSE, shows an outflow of $375 million.
These outflows are largely related to foreign investors selling HDFC Bank shares following disappointing results, according to analysts.
Prior to this series of outflows, foreign flows in January were largely positive.
The rupee, like other Asian currencies, will also have to contend with a dollar that is presently drawing support from doubts on whether the US Federal Reserve will cut interest rates this quarter.
The Fed was not expected to consider a cut at next week’s meeting.
But investors are now not too sure of a reduction in March either, with the odds of such a move receding in recent days in the wake of robust US data and pushback from Fed officials.
Indian rupee poised to weaken on receding bets of near-term Fed rate cuts
There is “growing uncertainty” on whether the Fed will cut rates as soon as March, ANZ said in a note.
Asian currencies were down 0.1% to 0.6% on the day.
The focus now turns to the first estimate of US gross domestic product for the fourth quarter on Thursday and the Personal Consumption Expenditures index (PCE) on inflation on Friday.
Comments
Comments are closed for this article.