By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee is expected to trade with a slightly positive bias on Wednesday following a pause in the U.S. dollar’s rally and a downtick in U.S. Treasury yields.
Non-deliverable forwards indicate the rupee will open at 83.02-83.04 to the U.S. dollar, compared with 83.0550 in the previous session.
USD/INR will likely have a “marginally offered” tone at the open and that probably will be there through the day, an FX trader at a bank said. The USD/INR near-term range is now “well-accepted” at 82.80-83.20, he said.
The dollar index fell from a near three-month high, slipping to 104.08 in Asia, while the two-year U.S. Treasury yield dropped. The dollar took a breather following a rally spurred by robust U.S. data, which has prompted investors to push back bets of when the Federal Reserve will deliver its first interest rate cut.
The near 3-in-4 odds of a rate cut at next month’s meeting at the beginning of January are now down to just 20%. In the wake of this, the dollar index is up 2.7% year-to-date.
Asian currencies are down 1% at 3.5% this year, while the rupee, is up slightly during this period. The Indian currency’s low volatility makes it an outperformer when the U.S. dollar rallies and an underperformer when the dollar is on the decline.
Markets now await clues on the U.S. interest rate path, and focus will be on comments by a slew of Fed officials this week.
“It’s unlikely that the signalling will be materially different from what we’ve heard in Fed Chair Powell’s conference – the Fed wants to see more evidence of an improvement in inflation before being confident about reaching the 2% inflation target sustainably,” ANZ said in a note.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.10; onshore one-month forward premium at 8 paise ** Dollar index down at 104.06 ** Brent crude futures up 0.4% at $78.9 per barrel ** Ten-year U.S. note yield at 4.0850%E ** As per NSDL data, foreign investors bought a net $91.9mln worth of Indian shares on Feb. 5
** NSDL data shows foreign investors bought a net $104.8mln worth of Indian bonds on Feb. 5
(Reporting by Nimesh Vora; Editing by Sonia Cheema)
