MUMBAI: The Indian rupee is likely to open higher on Tuesday on the back of a dip on the dollar index and bets that the central bank will not allow the currency to weaken much from the current level.
Non-deliverable forwards indicate rupee will open at around 82.90-82.92 to the US dollar compared with 83.03 in the previous session.
The dollar index dropped 0.5% on Monday, largely on account of the rally on the Japanese yen.
The rupee on Monday reached an intraday high of 82.82, thanks to the rally on the Chinese yuan and the Japanese yen, before dollar buying by oil companies and other importers made the currency weaken back below the 83 handle.
“Yesterday’s session has reinforced how major dips (on USD/INR) will be difficult to sustain,” a forex trader at a private sector bank said.
“On the other side, you have the Reserve Bank of India which is intent on not allowing rupee to make a record low.”
He sees the rupee holding a narrow range around 83 till “at least” the August US inflation data, which is due on Wednesday.
The data is seen important in gauging whether the Fed will hike rates again this year.
Indian rupee likely to remain above 83/USD on positive Asian cues
The probability of a rate hike at the Sept. 19-20 meeting is currently low at around less than 10%, but is at near 50% for the November meeting.
“The upcoming US inflation data will be key to determine whether the Fed leaves the door open for additional tightening in November or December,” Yeap Jun Rong, market strategist at IG Asia, said Most Asian currencies were rangebound on Tuesday and equity indexes were slightly lower.
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