MUMBAI: The Indian rupee is expected to open little changed in the wake of a further rise in US yields and a positive risk mood on optimism over an agreement on the US debt ceiling.
Non-deliverable forwards indicate rupee will open at almost around the same level of 82.38 in the previous session.
The local currency on Wednesday dropped to 82.4425, the lowest in over six weeks. At the current level, the risks of a move in either direction are almost equal, a trader at a private sector bank said.
“On the higher side (on USD/INR), you have expectations that the RBI (Reserve Bank of India) will be there and on the lower side, you have the US yields, the dollar index and supportive momentum,” he said Debt ceiling negotiations appeared to be moving in the right direction as US President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy vowed to avoid an economically catastrophic default.
US equities rallied more than 1% overnight, the dollar index rose and US yields marched higher.
Indian rupee hits six-week low on broad dollar strength
The 2-year yield reached 4.18% and is now 35 basis points higher from the lows reached following the April US inflation data.
Housing data released on Wednesday made a case for higher US yields. April housing starts rose 2.2% month-on-month versus expectations of a drop.
“At 1.40 million, the annualised level of housing starts is in the centre of its 1.34m–1.4m range for the past seven months, implying a high degree of resilience in the construction sector,” ANZ said in a note to clients.
Asian shares followed their US peers higher, while currencies were mixed.
The offshore Chinese yuan dropped to 7.0152 to the dollar.
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