Rupee to open higher on upbeat risk, upside seen largely capped
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The Indian rupee is expected to open higher to the U.S. dollar on Friday, boosted by the positive risk appetite and uptick in most of its Asian peers.
Non-deliverable forwards indicate the rupee will open at around 81.70-81.75 to the U.S. dollar compared, with 81.8375 in the previous session.
The rupee on Thursday reached an intraday high of 81.61, before reversing course in the last hour of trading on possible profit-taking by dollar short positions and dollar buying by public sector banks, according to traders.
That last hour of trading has "somewhat soured the good work that the rupee had managed" and in that sense "today's session is quite important", a Mumbai-based spot dealer said.
It was possible, based on Thursday's late price action, that the USD/INR could see decent buying interest following the opening dip, he said.
Asian shares and currencies were trading higher after U.S. equities jumped overnight to post their best session in months.
This is despite U.S. data fuelling stagflation worries. The country's economy slowed more than expected in the March quarter, while one of Federal Reserve’s favourite inflation gauge rose more than economists projected.
At the same time, initial claims for unemployment benefits fell, suggesting ongoing tightness in the labor market, a major driver of inflation.
A U.S. recession "looks increasingly likely", ING Bank said in a note. There was a clear threat of negative GDP prints in the third and fourth quarters in the wake of rapid and aggressive Fed interest rate increases and the tightening of lending standards intensified due to recent bank stresses, ING said.
The U.S. bond market seemed to focus more on inflation than on the growth outlook. U.S. yields rose with the two-year back above 4%. A 25 basis point rate hike by the Fed next week looks almost certain.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 81.84; onshore one-month forward premium at 11 paise ** USD/INR NSE May futures settled on Thursday at 81.9225 ** USD/INR May forward premium at 10.75 paisa ** Dollar index at 101.52 ** Brent crude futures up 0.2% at $78.6 per barrel ** Ten-year U.S. note yield at 3.53% ** SGX Nifty nearest-month futures up 0.5% at 18,075 ** As per NSDL data, foreign investors bought a net $176.2mln worth of Indian shares on Apr. 26
** NSDL data shows foreign investors bought a net $113.9mln worth of Indian bonds on Apr. 26
