Rupee likely to hold firm after weakening below key near-term level
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The Indian rupee is expected to consolidate at open against the U.S. dollar on Thursday, after falling below the important near-term support level of 82.20 in the previous session.
The non-deliverable forwards indicate the rupee will open at around 82.20-82.25 to the U.S. dollar compared with 82.2250 on Wednesday.
The rupee declined for the third straight session on Wednesday, bogged down by the cash and hedging dollar demand and higher U.S. yields, according to traders.
"It is sort of a surprise that we have managed to reach the 82.20 level. We were betting on a 81.80 to 82.20 immediate range," a spot dealer at a private sector bank said.
USD/INR will see a quiet open with traders assessing whether the up move "will stick" and likely to move higher in the afternoon, he said.
Other Asian currencies like the Chinese yuan and the Korean won weakened on Thursday, impacted by another move up in U.S. yields. The 2-year U.S. yield overnight reached 4.28%, the highest level since mid-March.
Higher-than-expected inflation in Britain and possibility that the Federal Reserve could keep hiking interest rates weighed on demand for U.S. bonds.
UK’s inflation data triggered a re-pricing higher across developed market yields, DBS Research said in a note.
"While inflation dynamics differ across countries it is still a reminder that price pressures linger."
Fed funds futures traders are pricing in a 90% probability the Fed will hike rates by an additional 25 basis points at its May 2-3 meeting. Further, odds that there could be another 25 basis points increase in June have been rising.
The dollar overnight rose against a basket of its major peers.
Risk appetite was weak with most Asian gauges and U.S. equity futures lower.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.34; onshore one-month forward premium at 11.5 paise ** USD/INR NSE April futures settled on Wednesday at 82.2575 ** USD/INR April forward premium at 2 paise ** Dollar index at 101.94 ** Brent crude futures down 0.7% at $82.6 per barrel ** Ten-year U.S. note yield at 3.6% ** SGX Nifty nearest-month futures up 0.2% at 17,691 ** As per NSDL data, foreign investors sold a net $67.3mln worth of Indian shares on Apr. 18
** NSDL data shows foreign investors bought a net $62.9mln worth of Indian bonds on Apr. 18
