MUMBAI: The Indian rupee was expected to weaken at the open on Monday as the US dollar and Treasury yields ticked higher as US data late last week affirmed the need for higher interest rates.

The rupee is seen around 82.45 per dollar in early trades, against its previous close of 82.27.

The currency was quite volatile last week, swiftly going from trading near 81.30 per dollar to 82.50 – despite several positive factors – due to likely equity position adjustments.

Softer oil prices are good for the rupee, but caution is expected ahead of the Federal Reserve policy outcome on Wednesday and other global central bank meetings this week, a foreign exchange trader said.

“Equity outflows are a visible headwind (to the rupee), likely given optimism on China,” Barclays wrote in a note. Asian stocks and currencies weakened across the board.

The South Korean won led losses with a 0.9% drop.

The dollar index was back above the 105-level, while the benchmark Treasury yields were at 3.5820%, having jumped 9 basis points on Friday.

Data, on that day, showed US monthly producer prices rose 0.3% in November, higher than expected, with October figures revised upwards, suggesting interest rates would remain higher for longer.

Consumer sentiment also improved. US consumer price index (CPI) data is due on Tuesday, which “will likely be the bigger driver” for the dollar, given the Fed’s guidance toward smaller hikes, Barclays said.

Indian rupee seen opening higher as oil falls further, Asian FX rise

The Fed is expected to raise rates by 50 basis points, but the focus will be on the central bank’s updated economic projections and Chair Jerome Powell’s press conference.

Bank of England and European Central Bank meetings to follow in the latter half of the week. In India, November CPI data is due after market hours, which likely cooled to a nine-month low of 6.40%, a Reuters poll showed.

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