MUMBAI: The India rupee is likely to open flat on Wednesday, although the Indian currency may face some pressure on the back of a decline in the offshore Chinese yuan that dragged most Asian currencies lower.
Non-deliverable forwards indicate rupee will open largely unchanged from its close at 83.28 against the US dollar on Tuesday.
The dollar index edged higher to 104.4, while the offshore Chinese yuan was down 0.1% at 7.25. The Japanese yen also fell 0.2% to 151.88, its weakest level since 1990.
Last week, a decline in the yuan had pressured the rupee alongside dollar outflows, pushing it to a record low on Friday. But the currency recovered by nearly 0.2% on Tuesday, likely aided by the central bank’s intervention and remittance inflows, traders said.
US data released overnight was mixed with durable goods orders showing a bigger-than-expected jump in February, although the consumer confidence print came in below expectations.
India’s current account deficit (CAD) narrowed to $10.5 billion in the October-December quarter, compared with $16.8 billion in year-ago period, according to data released on Tuesday.
The lower deficit along with a spike in foreign reserves to a record high last week reinforces the Indian economy improving external position, DBS Bank stated in a note on Wednesday.
DBS expects exporters’ activity and “stepped-up intervention,” by the central bank to keep the currency in the 83.20-83.40 band this week.
Indian rupee ends at over 5-month high, tracking Asian peers, foreign fund inflows
With no key US economic data expected, investors will keep an eye on remarks from Federal Reserve Board Governor Christopher Waller slated to speak later in the day.
In recent remarks, Fed officials have reiterated that they still believe inflation will continue to ease but also acknowledged the heightened sense of caution about the trajectory.
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