Rupee to take support from RBI’s late “heavy” intervention

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is expected to inch up at open on Friday, drawing support from the Reserve Bank of India’s (RBI) likely aggressive intervention late in the previous session.

Non-deliverable forwards indicate rupee will open at around 83.16-83.18 to the U.S. dollar compared with 83.2450 on Thursday.

The RBI was offering dollars all through Thursday’s session, and the intervention was particularly “heavy” just before 3.30 pm, a forex trader at a large foreign bank said. Normal over-the-counter hours are from 9 a.m. to 3.30 p.m. IST.

“You probably had a round of long positions (on USD/INR) deciding to exit then,” he said. “What happened late yesterday is probably setting the tone for today’s open.”

The rupee’s Asian peers declined after the 10-year U.S. Treasury yield rose to 5% for the first time since 2007.

Slightly higher-than-expected U.S. headline inflation data, robust U.S. economic data, unfavourable demand-supply dynamics and signals by Federal Reserve officials that interest rates will remain high have fuelled a selloff in Treasuries.

The 10-year U.S. yield came off slightly in Asia trading to 4.96%. Still, it is up nearly 40 basis points in October, that too, despite the Middle East conflict.

Fed Chair Powell on Thursday repeated the message that other policymakers have telegraphed, saying the U.S economy’s strength and continued tight labour markets could require still tougher borrowing conditions to control inflation, though rising market interest rates could make central bank action less necessary.

“Powell signalled that rates would be left unchanged at the Nov. 1-2 meeting but could remain ‘higher for longer’,” Singapore bank OCBC said in a note.

Data out on Thursday indicated that the U.S. labour market continued to defy slowdown expectations. US weekly jobless claims dropped to a nine-month low.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.24; onshore one-month forward premium at 7.5 paisa ** USD/INR NSE October futures settled on Thursday at 83.2425 ** Dollar index up at 106.26 ** Brent crude futures up 0.8% at $93.1 per barrel ** Ten-year U.S. note yield at 4.96%

** As per NSDL data, foreign investors sold a net $239 mln worth of Indian shares on Oct. 18

** NSDL data shows foreign investors bought a net $46.8 mln worth of Indian bonds on Oct. 18

(Reporting by Nimesh Vora; Editing by Janane Venkatraman)