Rupee may inch up tracking US Treasury yields fall, soft dollar

By Nimesh Vora and Jaspreet Kalra

MUMBAI (Reuters) – The Indian rupee is expected to advance on Tuesday in the wake of a pullback in U.S. Treasury yields and the dollar in the lead-up to a slew of key economic data.

Non-deliverable forwards (NDF) indicate rupee will open slightly higher to the U.S. dollar from 82.63 in the previous session.

“We think it will be a better opening (for the rupee) than NDF is suggesting,” a forex trader at a bank said.

“Having said that, it will be a very quiet session with an intraday range of less than 10 paisa. After the excitement when we saw 83, it is back to the quiet days.”

The rupee’s recent low was 83.16, from which it has recovered on the intervention by the Reserve Bank of India.

The rupee’s Asian peers inched up on Tuesday. The yield on the U.S. 10-year bond dipped four basis points on Monday and fell further in Asia to 4.18%. The two-year yields dropped below 5%.

The dollar index retreated to below 104. The U.S. currency, however, is likely to take support from indications from Fed Chair Jerome Powell that rates are likely to stay higher for longer. Moreover, the odds of a rate hike at either the September or November meeting are now higher.

The U.S. consumer confidence and job openings report is due later in the day. The ISM manufacturing number, the non-farm payrolls and the June quarter PCE data are due later in the week.

“Pay attention to today’s U.S. Conference Board consumer confidence report,” DBS Research said in a note.

“DXY (dollar index) could correct lower if U.S. consumer confidence index is lower.”

KEY INDICATORS:** One-month non-deliverable rupee forward at 82.68; onshore one-month forward premium at 7.5 paisa** USD/INR NSE September futures settled at 82.7175 on Monday NOT AVAILABLE** USD/INR September forward premium at 8.5 paisa** Dollar index down at 103.86** Brent crude futures down 0.2% at $84.2 per barrel** Ten-year U.S. note yield at 4.1886%** As per NSDL data, foreign investors sold a net $206.4 mln worth of Indian shares on Aug. 25** NSDL data shows foreign investors bought a net $19.7mln worth of Indian bonds on Aug. 25

(Reporting by Nimesh Vora; editing by Eileen Soreng)