By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee is expected to open higher on Friday on the back of a pullback in U.S. Treasury yields and a broadly softer dollar.
Non-deliverable forwards indicate the rupee will open at around 83.12-83.14 to the U.S. dollar compared with 83.21 in the previous session.
The rupee has been flirting with the record low of 83.29 and has largely avoided it, thanks to the Reserve Bank of India’s (RBI) intervention.
“It has been another week where the RBI has once again successfully avoided a big move,” a forex trader at a Mumbai-based bank said.
“Having said this, it does seem to me that the RBI is just delaying the inevitable.”
The dollar index retreated in the Asia session to 104.86, having reached a six-month high of 105.15 in the New York session. The 10-year U.S. yield was down about eight basis points from Thursday’s high of near 4.30%.
Data released on Thursday showed U.S. initial claims fell to 216,000, the lowest level since February and the fourth straight weekly decline. The 10-year U.S. yield inched up following the data, before pulling back.
The U.S. labor market “remains tight”, but there has “been some cooling” and it was likely that the Federal Reserve’s rate hike cycle was complete, ANZ said in a note.
Asian currencies were mostly higher. The offshore Chinese yuan underperformed, dropping to near 7.36 to the dollar.
Another round of losses in the yuan suggest that upside on the rupee following the open “will not be much”, the forex traders said.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.20; onshore one-month forward premium at 8.5 paisa ** USD/INR NSE September futures settled on Thursday at 83.26 ** USD/INR forward premium at 5 paisa ** Dollar index down at 104.85 ** Brent crude futures down 0.4% at $89.5 per barrel ** Ten-year U.S. note yield at 4.22% ** As per NSDL data, foreign investors sold a net $340.9mln worth of Indian shares on Sep. 6
** NSDL data shows foreign investors bought a net $21mln worth of Indian bonds on Sep. 6
(Reporting by Nimesh Vora; Editing by Sonia Cheema)