Indian rupee likely to open flat on negative Asian cues

MUMBAI: The Indian rupee was expected to open little changed to the US dollar on Tuesday amid a drop in Asian stocks and US equity futures due to worries over the global growth outlook.

The rupee was seen around 82.72-82.75 per dollar in early trade, compared with 82.7375 in the previous session.

The local currency has traded in a narrow 82.40-83 range for the past three weeks due to likely intervention by the Reserve Bank of India and importer hedging. Some analysts reckon that this narrow range will pave the way to excessive volatility in the days ahead.

“The only worry seems to be that the longer the rupee trades in a tight range, the more risk keeps getting built in for a breakout,” said Vikas Bajaj, head of currency derivatives at Kotak Securities.

“It’s a million dollar question, which way - upside or downside.” Asian shares were broadly lower and futures indicated a weak opening for US equities in the New Year.

Australian and South Korean shares were down 1.3% each, while the onshore Chinese yuan and the Korean won both slipped about 0.3%.

The demand for risk assets was impacted by concerns over China’s near-term economic outlook as a wave of coronavirus infections erupted following the dismantling of the zero-COVID policy and worries over the impact of the Federal Reserve’s rate hikes on US growth.

Indian rupee to open flat; volatility tipped to rise later in Jan

China’s factory activity shrank at a sharper pace in December as surging infections disrupted production, a private sector survey showed on Tuesday.

The International Monetary Fund, over the weekend, warned that the United States, Europe and China were all slowing down simultaneously, making the current year challenging for the global economy.

The minutes of the Fed’s December meeting due later this week are most likely to show that officials expect rates to remain high in the current year.

The dollar index was flat at 103.800. Apart from the Fed minutes, investors will be eyeing the US manufacturing and services data alongside the key monthly jobs report.