Rupee set to gain further after slide in US Treasury yields
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The Indian rupee is expected to rise further on Thursday following a pullback in U.S. Treasury yields on weak economic data.
Non-deliverable forwards indicate the rupee will open at around 82.58-82.60 to the U.S. dollar, compared with its close of 82.6850 in the previous session.
The rupee, on Wednesday, had its best session in more than two months after the Reserve Bank of India asked some banks to not initiate new outright NDF arbitrage positions.
The "hangover from yesterday alongside the fall in U.S. yields" will "ensure a decent session" for the rupee, a forex trader at a Mumbai-based bank said.
"If the rupee does manage to add to, or at least hold on to, yesterday's rally, you would have to say the near-term outlook has turned favourable."
The selloff in the U.S. Treasuries halted following disappointing data. U.S. business activity approached the stagnation point in August, with growth at its weakest since February, with demand for new business in the vast service sector contracting.
"The data indicate both manufacturing and services are contracting. Leading indicators of future activity suggest weakness lies ahead," ANZ said in a note.
The weak Eurozone flash composite PMI data provided another reason for investors to buy bonds.
"In recent months, the PMI has painted a worsening picture of eurozone activity, and August data are no different." ING Bank said in a note.
The dollar index fell by the most in more than two weeks on Wednesday. Asian currencies were mostly higher, with the Korean won leading the way.
The drop in U.S. Treasury yields boost risk appetite. The S&P 500 index rose 1% and futures pointed to the index adding to the rally. Asian shares advanced.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 82.68; onshore one-month forward premium at 8 paisa
** USD/INR NSE August futures settled on Wednesday at 82.7350
** USD/INR August forward premium at 1.75 paisa
** Dollar index at 103.38
** Brent crude futures down 0.4% at $82.9 per barrel
** Ten-year U.S. note yield at 4.2%, now down about 16 bps from recent highs
** As per NSDL data, foreign investors sold a net $13.1 mln worth of Indian shares on Aug. 22
** NSDL data shows foreign investors sold a net $257.5 mln worth of Indian bonds on Aug. 22
