Rupee, boosted by inflows, takes aim at key resistance
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The Indian rupee will attempt to move past an important level on the back of dollar inflows on Friday, while investors keep an eye out for possible intervention by the central bank.
Non-deliverable forwards indicate the rupee will open barely changed to the U.S. dollar from 82.84 in the previous session.
There are "plentiful inflows", largely on the capital side and to an extent on the portfolio front, a FX trader said.
"What matters now is whether you see a drop (on USD/INR) below 82.75-82.80 and we have a new lower range," he said.
"Like it has been for several months, all depends on what RBI (Reserve Bank of India) wants."
The RBI on Thursday did not intervene to buy dollars late in the session, like it had in the previous two days, helping rupee to its best level since September on a closing basis.
To strengthen past 82.75-82.80, the rupee will have to contend with a rise in near-maturity U.S. Treasury yields and a further easing in odds of an imminent Federal Reserve rate cut.
The rally in U.S. equities and data that indicated that the labor market continues to hold up well pushed U.S. yields higher. The number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
"If claims surprise in the next couple of weeks, they could reverse the expectations for February’s U.S. nonfarm payrolls to fall below 200,000 a fortnight from today," DBS Research said in a note.
Further underscoring the view that the Fed can afford to be patient on rate cuts, U.S. existing home sales rose the highest level since last August.
The 2-year U.S. bond yield rose to the highest since mid-December. It is now up 60 basis points from the year-to-date low.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.92; onshore one-month forward premium at 7.50 paisa ** Dollar index inches down to 103.88 ** Brent crude futures at $83.36 ** Ten-year U.S. note yield at 4.33% ** As per NSDL data, foreign investors bought $47.5 million of Indian shares on Feb. 21
** NSDL data shows foreign investors sold $59.9 million of Indian bonds on Feb. 21
