MUMBAI: The Indian rupee will decline at open on Wednesday, tracking the broad decline on Asian peers amid a rise in US Treasury yields. Non-deliverable forwards indicate the rupee will open at 83.20 to the US dollar compared with 83.1775 in the previous session.
The 10-year US Treasury yield is at the highest in more than three weeks, lifting the dollar against major currencies. Soft demand at a Treasury auction alongside data that showed US consumer confidence unexpectedly improved in May dented demand for Treasuries.
US yields “should carry” the USD/INR higher now that the downside bias “has faded”, a currency trader at a Mumbai-based bank said. The USD/INR has recovered after having dipped to 83.0250 on Friday.
“You have a decent recovery and that I think will bring in short positions. Plus, you have inflow lined up.”
The MSCI index rebalancing, which will come into effect from May 31, is expected to bring in foreign inflows of $2.5 billion, according to Nuvama Wealth Management. The dollar index, helped by US yields, is up to 104.70. Asian currencies were down 0.1% to 0.4%, with the offshore Chinese yuan at the weakest since late April.
Investors await the US core April PCE data due on Friday, which would help them gauge whether the Federal Reserve will cut rates later this year.
Indian rupee ends moderately higher
The extent of rate cuts expected in 2024 are the least amid inflation remaining high, the US economy holding up and comments by policymakers that lean towards delaying rate cuts.
The April PCE data is the last major data release ahead of June Fed meeting, ANZ Bank said.