Rupee may decline slightly on weak risk, dollar uptick

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is expected to fall on Tuesday in wake of losses on Asian peers and poor risk appetite.

Non-deliverable forwards indicate rupee will open at around 81.98 to the U.S. dollar compared with 81.9350 in the previous session.

The rupee on Monday witnessed a quiet session, hovering in a 81.90-82.00 range.

“It is to be expected that there will be support (for USD/INR) at below 82,” an FX trader at a private sector bank said.

“Today, it looks like a another holding session with a mild bias on the upside (for USD/INR pair). Having said that, we would sell on the uptick.”

The offshore Chinese yuan dropped below 7.18 to the dollar, not too far from the year-to-date low. China on Tuesday, expectedly, lowered two more key lending by 10 basis points.

Other Asian currencies were down 0.1% to 0.3% while the dollar index inched up to 102.56.

Asian equities were mostly lower, pressured by China’s tepid post-pandemic recovery. Meanwhile, futures pointed to a sightly lower opening for U.S. equities following the three-day weekend.

Focus this week is on Federal Reserve Chair Jerome Powell’s testimony to U.S lawmakers. This comes after the U.S. central bank opted for a pause last week following rate hikes over the previous ten meetings.

However, it was a hawkish pause, with the median view of Fed officials about the terminal rate rising by 50 basis points to 5.625%.

While the Fed paused last week, “it has more work to do,” ANZ said in a note.

“Although there are some encouraging signs that inflation is moderating, it isn’t sufficient,” ANZ said. The bank pointed that core U.S inflation rose by 0.4% month-on-month in May, well above a rate consistent with 2% annualised inflation.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.06; onshore one-month forward premium at 7.5 paisa ** USD/INR NSE June futures settled at 81.9675 on Monday ** USD/INR June forward premium 1.75 paisa ** Dollar index up at 102.58 ** Brent crude futures down 0.2% at $75.9 per barrel ** Ten-year U.S. note yield at 3.7880% ** SGX Nifty nearest-month futures down 0.3% at 18,809 ** As per NSDL data, foreign investors bought a net $22.1 mln worth of Indian shares on June 16

** NSDL data shows foreign investors bought a net $133.8 mln worth of Indian bonds on June 16

(Reporting by Nimesh Vora; Editing by Varun H K)