Indian rupee to hover near all-time low on fragile risk tone, skewed flows

MUMBAI: The Indian rupee is set to dip at open and trade with a heavy tone on Monday, pressured by weak risk appetite and lopsided flows, after sliding to lifetime lows in back-to-back sessions.

The 1-month non-deliverable forward indicated the rupee will open in the 90.46-90.52 range versus the U.S. dollar, having settled at 90.4150 on Friday.

The rupee slid to a new all-time low of 90.55 per dollar on Friday, marking its second straight session of a new low and capping a week in which it lost nearly 0.5%. Year-to-date, the currency is down 5.6%.

A familiar mix of headwinds continues to dominate - the lack of a U.S. trade deal has sapped sentiment, capital flows remain weak at a time when the trade deficit is widening, and a depreciation bias is encouraging importers to step up hedging, leaving exporters reluctant to add dollar supply.

“What stands out is how skewed the daily flow has become,” a Mumbai-based currency trader said.

“The order book is stacked with buying interest, with exporter offers thin and spaced out.”

The Reserve Bank of India has stepped in frequently in recent months to slow the rupee’s slide. However, its support has appeared less forceful since the currency weakened past the 88.80 level.

The rupee Monday will have to contend with the poor risk sentiment on the day. Asian equities dipped, tracking the slide in their U.S. peers on Friday.

While the softer risk tone has so far left most Asian currencies largely unscathed, the rupee may still struggle, a currency trader said.

Attention this week be on central bank meetings. The Bank of Japan is widely expected to raise rates by 25 basis points to 0.75%, while the Bank of England is seen delivering an equal-sized cut to 3.75%. The European Central Bank, meanwhile, is expected to keep the policy rate unchanged.

A slate of U.S. economic data delayed by the federal shutdown is due this week, including the November jobs report and the monthly consumer price index.