Rupee likely to maintain downward drift, RBI counted on to cap losses
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Headwinds for the Indian rupee are likely to persist on Wednesday amid ongoing strength in the U.S. dollar and a lingering bearish bias on the local currency that may push it to another lifetime low, but traders expect the central bank's intervention to limit sharp losses.
The one-month non-deliverable forward indicated that the rupee may open near 84.88, compared to its all-time low of 84.8575 hit in the previous session. The currency had closed at 84.8525 on Tuesday.
The rupee came under pressure on Tuesday as the appointment of career bureaucrat Sanjay Malhotra as the next Reserve Bank of India (RBI) governor prompted traders to raise bets on domestic rate cuts next year.
Malhotra has been appointed as RBI governor for three years starting Wednesday after the six-year term of outgoing governor Shaktikanta Das ended on Dec. 10.
While the RBI's intervention helped the rupee avert deeper losses on Tuesday, the currency is expected stay under pressure and trade in a range of 84.77-84.97 in the near-term, said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.
Dovish expectations following Malhotra's appointment have added to the rupee's troubles as the currency has remained on the backfoot over the last two months, hurt by portfolio outflows, renewed tariff concerns from the incoming U.S. administration and persistent strength in the U.S. dollar.
The dollar index was at 106.3 on Wednesday after rising to a one-week high the previous session, while most Asian currencies edged higher ahead of the release of U.S. consumer inflation data later in the day.
The greenback has "has gained some upside momentum as markets await the U.S. CPI data later today," MUFG Bank said in a note.
Economists polled by Reuters expect the data to show that core consumer prices rose 0.3% month-on-month in November, unchanged from the previous month.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 85.04; onshore one-month forward premium at 16.25 paise
** Dollar index at 106.3
** Brent crude futures up 0.6% at $72.7 per barrel
** Ten-year U.S. note yield at 4.23%
** As per NSDL data, foreign investors bought a net $70.8 million worth of Indian shares on Dec. 9
** NSDL data shows foreign investors bought a net $48.5 million worth of Indian bonds on Dec. 9
