Rupee to weigh pause in rally on Asian Fx, rebound in US yields

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is expected to have a quiet opening on Tuesday amid a pause in the rally in Asian peers and a rebound in U.S. Treasury yields.

Non-deliverable forwards indicate the rupee will open at around 83.22-83.24 to the U.S. dollar compared with 83.2150 in the previous session.

The rupee has not responded much to the increasing likelihood that the U.S. Federal Reserve is done hiking rates. The domestic currency for weeks now has been in an 83 to 83.30 range.

A forex trader said it is very evident that the rupee is currently in a place where it does not get impacted by the broader dollar moves or anything else.

“Honestly, have given up on looking for the trigger that can shake off this current phase,” the trader added.

The decline in U.S. yields and the rally in Asian currencies reversed slightly. The 10-year U.S. yield and the dollar index rose on Monday, prompting a drop in Asian currencies.

The dollar index in the European session had dropped to the lowest in more than a month, before making a recovery.

Weak U.S. jobs and manufacturing and services data alongside what a few analysts said was a dovish Fed outcome has dented demand for the dollar. The odds of a Fed rate hike at next month’s meeting are down to just 10%.

In the wake of the weak data, investors will eye comments by senior Fed officials, including Chair Jerome Powell. Bank of England and European Central Bank officials are also scheduled to speak this week.

“We anticipate guidance that rates will have to remain at peak levels for a long time to bring inflation back to target, and that, while there is evidence inflation is improving, the battle is not won,” ANZ said in a note.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.27; onshore one-month forward premium 5.25 paisa ** Dollar index up at 105.32 ** Brent crude futures down 0.4% at $84.8 per barrel ** Ten-year U.S. note yield at 4.64% ** As per NSDL data, foreign investors sold a net $10.3 mln worth of Indian shares on Nov. 3

** NSDL data shows foreign investors bought a net $67.5 mln worth of Indian bonds on Nov. 3

(Reporting by Nimesh Vora; Editing by Sohini Goswami)