Indian rupee to edge lower at open, bearish tilt persists on weak flows

MUMBAI: The Indian rupee is likely to open a tad lower and stay on the defensive on Tuesday, weighed down by weak portfolio flows and higher dollar demand in the non-deliverable forwards market, which traders reckon signals bearish positioning on the currency.

The 1-month NDF indicated the rupee will open in the 90.12-90.14 range versus the U.S. dollar, having settled at 90.07 on Monday.

The rupee is Asia’s worst performing major currency this year. Its downward bias was reinforced last week after it fell past the 90 per dollar mark and hit an all-time low of 90.42.

In recent sessions, traders have pointed to strong dollar bids in the NDF market that often indicate a pick up in speculative activity.

“Offshore has been sticking to long positions (on USD/INR), while RBI doesn’t seem to be very active,” a trader at a Mumbai-based bank said, pointing to the rise in near-tenor NDF points.

The 1-month USD/INR NDF points were last at 25 paisa after hitting an over 8-month high of 29 paisa in the previous session.

Besides pressure from the NDF market, weakness in foreign portfolio flows also remains a sore spot for the rupee, with analysts saying a turnaround in foreign flows hinges on a breakthrough in U.S.-India trade talks.

Foreign investors have net sold $1.3 billion of local stocks so far in December .

U.S. Treasury Secretary Scott Bessent said on Tuesday that Washington is still working on a trade deal.

“We are hesitant to be too bearish (on rupee) at current levels given how much USD/INR has already spiked and any news around US-India trade deal could start to move the needle in terms of flow dynamics,” MUFG said in a note.

Elsewhere, the dollar index was steady at 99, while most Asian currencies were a tad weaker. A powerful 7.5-magnitude earthquake in Japan added to the risk-averse mood heading into key central bank policy decisions this week.