MUMBAI: The Indian rupee is expected to inch up at open on Tuesday, helped by the Chinese yuan’s recovery following a significantly below-than-expected daily USD/CNY fix.
Non-deliverable forwards indicate rupee will open at around 81.94-81.96 to the US dollar compared with 82.04 in the previous session.
The “non-directional” moves around 82 will continue with a slightly lower bias (on USD/INR pair), an fx trader said.
“Our expectations of any major move following the opening dip are quite low.”
Given the recent price action, the rupee’s expected near-term range has shrunk to 81.80-82.20, he said.
The offshore yuan climbed 0.3% to 7.2220 to the US dollar in the wake of the People’s Bank of China setting the USD/CNY mid-point at about 100 pips below estimates, potentially signalling that it may be uncomfortable with the pace of the yuan’s decline.
Indian rupee holds in narrow range around 82/USD, premiums higher
“It is the first time that the fixing showed the downside bias in the recent round of RMB (or CNY) depreciation,” OCBS Treasury said in a note.
“Market will continue to watch for the fixing bias in the coming days to gauge whether there is any intention to slow down the pace of RMB depreciation.”
The offshore yuan before the daily fix had dropped to near 7.25 to the dollar.
Tracking the yuan, other Asian currencies rose.
The dollar index dropped to nearly 102.60 while Asian equities were mostly higher. Investors are looking to assess how much higher US interest rates will rise from here.
The Federal Reserve has indicated two more rate hikes, while futures are indicating only one more rate hike.
There is a host of US data this week that could shape expectations around interest rates.
The most important of the data points is the core PCE print, which is due on Friday.
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