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Rupee helped by weak US data, nine-month low India trade deficit
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The Indian rupee will open marginally higher on Friday in the wake of a pullback on the dollar following disappointing U.S. retail sales and industrial output data.
Non-deliverable forwards indicate the rupee will open at around 82.99-83.01 to the U.S. dollar, compared with the previous session's closing of 83.0425.
India's merchandise trade deficit moderated to a 9-month low at $17.5 billion in January, while the services surplus rose to $16.8 billion. The data was out during trading hours on Thursday.
"The trade deficit numbers and the surplus in services "further strengthen our positive outlook on the rupee," a foreign exchange proprietary trader at a bank said.
The USD/INR pair is "a simple sell on rallies", the trader said.
The dollar index had its worst session in two weeks on Thursday following a sharp drop in U.S. retail sales in January, and a downward revision for the previous two months. A separate report showed an unexpected decline in U.S. industrial production.
The 2-year U.S. Treasury yield dipped slightly on Thursday, while expectations regarding the Federal Reserve rate decision at the March and May meeting were broadly unchanged.
The likelihood of a Fed rate cut at the March meeting are only at 10%, while for May it's just 30%.
"The retail sales report this month supports our view that the economy is strong but cooling. There is no reason for the Fed to rush the next move in rates," Morgan Stanley said in a note.
"We expect the Fed to first cut the funds rate in June, once the Fed has enough data to feel confident that inflation is moving sustainably towards the 2% target."
The U.S. jobless claims numbers out on Thursday indicated that the labor market remains resilient, suggesting that the Fed can afford to take a patient stance on cutting interest rates.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.08; onshore one-month forward premium at 8 paisa ** Dollar index at 104.36 ** Brent crude futures at $82.8 per barrel ** Ten-year U.S. note yield at 4.25%
** As per NSDL data, foreign investors sold a net $316.3mln worth of Indian shares on Feb. 14
** NSDL data shows foreign investors sold a net $13.7mln worth of Indian bonds on Feb. 14
