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Rupee impasse to persist; Fed outlook barely affected by US inflation data
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The Indian rupee is likely to open nearly flat on Friday and hold a narrow range after U.S. inflation data did not have much of an impact on the Federal Reserve near-term interest rate outlook.
The one-month non-deliverable forward indicated that the rupee will open barely changed from 83.9675 in the previous session.
U.S. September headline and core inflation rose more than expected while U.S. initial jobless claims jumped, data on Thursday showed, further complicating the debate on whether the Fed will cut rates at its November meeting or be on hold.
In the wake of the data that suggested that prices pressures persisted and the labour market may be softening, investors do not have further clarity on what the Fed is likely to do next. The odds of whether the central bank will opt for 25-basis-point rate cut or leave rates are unchanged from before the data was released.
The rupee was in a three-paisa range on Thursday, and through this week that range has been just six-paisa. Equity outflows, weakness in Asian peers and the rise in oil prices due to the Middle East conflict are weighing on the rupee. On the other hand, the Reserve Bank of India (RBI) is making sure that rupee does not decline past the 84 handle.
"USD/INR has no major trigger in the coming couple of weeks to move it out of the range," Srinivas Puni, managing director at QuantArt Market Solutions, said.
"More days of the current range are in the offing unless there is an unexpected escalation in the Middle East."
FOREIGN OUTFLOWS
Amid the Middle East conflict and China's stimulus, foreign investors have taken out nearly $7 billion from Indian equities so far this month.
"The flows have barely made a dent (on the rupee), which is noteworthy," a currency trader at a bank said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 84.10; onshore one-month forward premium at 12.75 paise
** Dollar index down at 102.88
** Brent crude futures at $79 per barrel
** Ten-year U.S. note yield at 4.06%
** As per NSDL data, foreign investors sold a net $438.2 million worth of Indian shares on Oct. 9
** NSDL data shows foreign investors bought a net $31.3 million worth of Indian bonds on Oct. 9
