MUMBAI: The Indian rupee is expected to decline on Wednesday, pressured by the yuan’s fall on worries over China’s growth outlook. Non-deliverable forwards indicate the rupee will open at 82.08-82.12 to the US dollar, compared with 82.03 on Tuesday.
With the yuan “back to losing ways”, the rupee will struggle at the open, a forex trader said. “Anyway, (USD/INR) was not managing to slip below 82 and now we have an excuse to take it to the 82.20-82.30 resistance.”
The rupee has repeatedly failed to scale the 82 handle despite equity inflows, thanks to likely intervention by the Reserve Bank of India, according to traders. They estimate the central bank has set a floor for USD/INR at 81.80-81.90.
The offshore Chinese yuan dropped to 7.2140 to the dollar, headed for its fourth straight day of declines, on persistent pessimism regarding the Chinese economy.
Deutsche Bank, on Tuesday, became the latest Wall Street brokerage to lower its forecast for China’s 2023 economic growth.
Indian rupee to hang around 82/$ on soft dollar, RBI intervention bets
On Monday, J.P.Morgan, Morgan Stanley and Citigroup had trimmed their forecasts. Tracking the yuan, most other Asian currencies declined.
The dollar index managed to inch higher to 100.
US data on Tuesday was a tad weaker than expected, with retail sales increasing 0.2% on-month in June, versus 0.5% expected, while industrial production fell a further 0.5%.
The data, however, did not impact risk appetite or bond yields.
The S&P 500 index rose to its highest since April 2022 and the 2-year US yield inched up to 4.75%.
The next important event is the Federal Reserve’s meeting next week.
A 25 basis points rate hike has been fully priced in.
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