Rupee set for slightly weak start to data-heavy week
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The Indian rupee may open marginally lower on Monday, bogged down by the decline in Asian currencies, to kick off a data-heavy week that includes the release of the U.S. inflation data and then the Federal Reserve rate decision.
Non-deliverable forwards indicate the rupee will open at around 82.50 to the U.S. dollar, compared with its close of 82.4625 in the previous session.
"Rupee traders will be hoping for a little bit of volatility this week," a fx spot trader said. "Apart from the absolutely crucial U.S. inflation and Fed, you have India inflation and the ECB," he said, referring to the European Central Bank's policy decision.
Asian currencies were down 0.2% to 0.4% and the dollar index inched higher. Shorter maturity U.S. yields rose - the 2-year was at its highest in two weeks - supporting the dollar.
All eyes will be on the U.S. inflation data due Tuesday, just a day before the Fed interest rate decision. U.S. core inflation is expected to rise 0.4% month-on-month and the headline by 0.2%, according to a poll by Reuters.
Currently, futures are pricing in only a 1-in-4 chance of a rate hike on Wednesday.
But, the Bank of Canada's (BOC) and the Reserve Bank of Australia's (RBA) surprise hikes dictate "complacency is not advisable", OCBC Treasury Research said in a note.
The ECB is expected to raise rates by 25 basis points on Thursday.
Meanwhile, India's inflation data is due later in the day. Economists reckon consumer inflation rose by 4.42% last month, easing from 4.7% in April.
The Reserve Bank of India last week indicated that it remained cautious on the inflation outlook.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 82.55; onshore one-month forward premium at 7 paisa
** USD/INR NSE June futures settled on Friday at 82.52
** USD/INR June forward premium at 4 paisa
** Dollar index up at 103.68
** Brent crude futures down 1.2% at $73.9 per barrel
** Ten-year U.S. note yield at 3.75%
** SGX Nifty nearest-month futures up 0.4% at 18,681
** As per NSDL data, foreign investors bought a net $74.2 million worth of Indian shares on June 8
** NSDL data shows foreign investors sold a net $33.5 million worth of Indian bonds on June 8
