Rupee likely higher; awaits pivotal US inflation data, eyes yuan
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The Indian rupee is expected to open slightly higher on Tuesday ahead of key U.S. inflation data, which analysts reckon may prove instrumental in the Federal Reserve's decision on interest rates.
Non-deliverable forwards indicate rupee will open at around 82.40 to the U.S. dollar compared with 82.43 in the previous session.
The offshore Chinese yuan dropped to the lowest since November to 7.1780 to the dollar. The People's Bank of China set the yuan mid-point at a weaker than expected level and cut the seven-day reverse repo rate, boosting USD/CNH
USD/INR is "well offered" on offshore NDF, despite the weak yuan, a foreign exchange spot trader said. India's inflation was positive for the rupee "on the margins" and "now let's see how U.S. data plays out", the trader added.
India's annual retail inflation cooled to 4.25% in May from 4.7% in April, data released after market hours on Monday showed, reinforcing expectations of a prolonged pause on rates by the Reserve Bank of India. Economists polled by Reuters had predicted a 4.42% print.
The U.S. inflation data is due later in the day, with economists polled by Reuters projecting a 0.4% on-month increase in the core inflation rate.
The data comes a day ahead of the Fed decision on interest rates. Futures are pricing in only a 1-in-4 chance that the Fed will hike rates.
"With the Fed expected to pause on rates, any upward surprise on inflation could bring a rate rise back into consideration," ANZ said in a note.
The dollar index was barely changed at near 103.50 while the 2-year U.S. yield dropped to 4.55%. Risk assets were not too worried about the data with the S&P 500 index at its highest since April 2022.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.46; onshore one-month forward premium at 7.5 paisa ** USD/INR NSE June futures settled on Monday at 82.49 ** USD/INR June forward premium at 3.75 paisa ** Dollar index down at 103.50 ** Brent crude futures up 0.5% at $72.2 per barrel ** Ten-year U.S. note yield at 3.72% ** SGX Nifty nearest-month futures up 0.3% at 18,762 ** As per NSDL data, foreign investors sold a net $16.1mln worth of Indian shares on Jun. 9
** NSDL data shows foreign investors bought a net $12.3mln worth of Indian bonds on Jun. 9
