MUMBAI: The Indian rupee is likely to hover near its all-time low at open on Friday, unable to benefit from a drop in US bond yields, with traders expecting intervention from the Reserve Bank of India to continue limiting the currency’s losses.
Non-deliverable forwards indicate rupee will open at around 83.73-83.74 against the US dollar, marginally weaker than its close at 83.7175 in the previous session.
The rupee had declined to its all-time low of 83.7450 on Wednesday.
The local currency has stayed under pressure for the majority of the last two weeks due to equity-related outflows and a prevailing bias towards steady depreciation.
The decline came despite positive cues such as the Federal Reserve’s signalling a likely interest rate cut in September.
The dollar index was at 104.39 after rising nearly 0.3% on Thursday, as concerns about geopolitical tensions gave it a safe-haven boost and also helped drive US bond yields lower.
The 10-year US Treasury yield declined to a six-month low of 3.94% in Asia trading with a surprise weakness in US manufacturing data sparking concern that the economy could be on course for a hard landing.
The rupee appears to be “headed lower steadily,” with a strong local appetite to buy dollars limiting gains while the Reserve Bank of India’s interventions keep sharp declines at bay, a foreign exchange trader at a state-run bank said.
Indian rupee ends moderately higher
“We expect the (Indian) central bank to continue to intervene and hence keep FX volatility at decadal lows,” MUFG Bank said in a note. Asian currencies were mixed on Friday, with the Korean won down nearly 0.5%, while the offshore Chinese yuan and the Thai baht gained slightly.
Investors will pay close attention to a key US jobs report due later on Friday alongside remarks from Fed policymakers.
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