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All-time low beckons for rupee on slide in yuan, rally in dollar index
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The Indian rupee is likely to open at a lifetime low on Tuesday, weighed by the rally in the dollar index and the slump in the Chinese yuan in the wake of Donald Trump's victory in the U.S. Presidential election.
The 1-month non-deliverable forward indicated that the rupee will open at 84.40-84.42 to the U.S. dollar, inching past the all-time low of 84.3925 hit on Monday.
The rupee has been making all-time lows after Trump's U.S. election victory.
The rupee would likely have fallen much more, probably near the 85-level, if it were not for the Reserve Bank of India's regular intervention, per several traders.
The RBI "has been aggressive on the offer (on dollar/rupee)" and that "in a way is keeping things peaceful", a trader at a bank said.
The sense right now is that the RBI wants the rupee to weaken due to what is happening to the dollar overall, but at a pace that does not "cause alarm", he said.
DOLLAR CLIMBS
The expectations that Trump will implement economic and trade policies that will boost the U.S. economy have sent the dollar and U.S. Treasury yields higher. The dollar index is hovering at the highest in over 4 months.
The offshore yuan, likely to be most impacted by Trump's trade policies, slipped past 7.24 to the dollar and is now down nearly 2% since Trump's win.
The rupee is down just 0.35% during that period.
FED RATE CUTS ODDS SLIP
The odds that the Federal Reserve will deliver a rate cut at next month's meeting have slipped on prospects that Trump's policies are likely to muddle the inflation outlook. The probability of a rate cut in December is down to 2-in-3 from nearly 80%.
KEY INDICATORS:** One-month non-deliverable rupee forward at 84.50; onshore one-month forward premium at 8.5 paise
** Dollar index up at 105.62
** Brent crude futures down 0.3% at $71.6 per barrel ** Ten-year U.S. note yield at 4.32%
** As per NSDL data, foreign investors sold a net $421.1 mln worth of Indian shares on Nov. 8
** NSDL data shows foreign investors sold a net $21.1 mln worth of Indian bonds on Nov. 8
