MUMBAI: The Indian rupee is expected to decline on Monday, tracking a fall in other Asian currencies on the back of an uptick in near maturity US yields. Non-deliverable forwards indicate the rupee will open at around 82.02-82.04 to the US dollar, compared with the previous session’s close of 81.9450.
The rupee held in a narrow range of 81.94 to 82.20 last week amid possible dollar purchases by the Reserve Bank of India and portfolio inflows.
This week is full of important central bank meetings and hopefully there should be a little more volatility and volumes,“ said a forex trader at a bank.
In line with Asia, the USD/INR pair will open higher, but “we would say the bias is slightly on the downside”, he said.
The US Federal Reserve and the European Central Bank are widely expected to hike rates this week, while the Bank of Japan is unlikely to tweak its current yield curve control policy.
The Fed is almost certain to raise rates by 25 basis points on Wednesday and economists expect the US central bank to maintain a hawkish tone.
“There are encouraging signs (US) price pressures are moderating, but it’s not clear it’s enough to get inflation back to 2% sustainably,” ANZ said in a note. “Fed Chair (Jerome) Powell is likely to reiterate his view that additional tightening will be needed.
Indian rupee to fall on dollar recovery on signs US job market remains robust
We expect him to remain hawkish on inflation despite signs of progress on disinflation.“ The 2-year US yield rose to 4.8650%.
Asian currencies were down 0.1% to 0.4%. Along with the Fed decision, investors are also awaiting a slew of key US data prints this week, including the flash purchasing manager’s index, the June-quarter GDP data, the initial jobless claims print, and the core personal consumption expenditures index.
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