India rupee to receive help from pullback in oil, traders eye US inflation

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee on Thursday will be boosted by the pullback in oil prices and softer U.S. Treasury yields, while investors wait for the important U.S. inflation data due later in the day.

Non-deliverable forwards indicate rupee will open marginally higher than 83.1875 in the previous session.

Brent crude dipped in Asia to $85.40 per barrel, adding to Wednesday’s 2% fall fuelled by the larger-than-expected rise in U.S. inventories.

Brent has surrendered a large part of the rally prompted by the military conflict in the Middle East and is now only about 1% higher than what it was prior to the crisis.

“The relief on oil makes it all the more likely that we will not see an upside breakout (on USD/INR),” a spot forex trader at a mid-sized private sector bank said.

“Expect range of 83.10-83.20 today before we see the U.S. and India inflation prints.”

India’s inflation data is due after market hours.

Meanwhile, headline U.S. consumer inflation index (CPI) is expected to rise 0.3% month-on-month. The more critical core measure is forecast to increase at the same pace, according to economists polled by Reuters.

The data comes in the wake of investors pushing the probability of a rate hike by the Federal Reserve at the next meeting to less than 10%.

Comments by Fed officials that the jump in long maturity U.S. yields may allow the central bank to not raise the policy rate more has impacted the outlook for the Oct. 31-Nov. 1 meeting.

Data released on Wednesday showed that U.S. producer price index (PPI) rose more than expected in September.

“Today’s U.S. CPI inflation may surprise like yesterday’s PPI inflation,” DBS Research said in a note.

The 10-year U.S. yield was just below 4.60%. Safe-haven demand on account on the Middle East conflict and less dovish comments from Fed officials has prompted yields to pullback from multi-year highs.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.26; onshore one-month forward premium at 10.75 paisa ** Dollar index at 105.68 ** Brent crude futures down 0.6% at $85.3 per barrel ** Ten-year U.S. note yield at 4.57% ** As per NSDL data, foreign investors sold a net $108.6 mln worth of Indian shares on Oct. 10

** NSDL data shows foreign investors bought a net $61.6 mln worth of Indian bonds on Oct. 10

(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)