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2024-08-02 09:16:42 am | Source: Reuters
Rupee to hover near record low, central bank counted on to support
Rupee to hover near record low, central bank counted on to support

The Indian rupee is likely to hover near its all-time low at open on Friday, unable to benefit from a drop in U.S. bond yields, with traders expecting intervention from the Reserve Bank of India to continue limiting the currency's losses.

Non-deliverable forwards indicate rupee will open at around 83.73-83.74 against the U.S. dollar, marginally weaker than its close at 83.7175 in the previous session.

The rupee had declined to its all-time low of 83.7450 on Wednesday.

The local currency has stayed under pressure for the majority of the last two weeks due to equity-related outflows and a prevailing bias towards steady depreciation. The decline came despite positive cues such as the Federal Reserve's signalling a likely interest rate cut in September.

The dollar index was at 104.39 after rising nearly 0.3% on Thursday, as concerns about geopolitical tensions gave it a safe-haven boost and also helped drive U.S. bond yields lower.

The 10-year U.S. Treasury yield declined to a six-month low of 3.94% in Asia trading with a surprise weakness in U.S. manufacturing data sparking concern that the economy could be on course for a hard landing.

The rupee appears to be "headed lower steadily," with a strong local appetite to buy dollars limiting gains while the Reserve Bank of India's interventions keep sharp declines at bay, a foreign exchange trader at a state-run bank said.

"We expect the (Indian) central bank to continue to intervene and hence keep FX volatility at decadal lows," MUFG Bank said in a note.

Asian currencies were mixed on Friday, with the Korean won down nearly 0.5%, while the offshore Chinese yuan and the Thai baht gained slightly.

Investors will pay close attention to a key U.S. jobs report due later on Friday alongside remarks from Fed policymakers.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 83.82; onshore one-month forward premium at 7.75 paisa

** Dollar index at 104.39

** Brent crude futures up 0.4% at $79.83 per barrel

** Ten-year U.S. note yield at 3.95%

** As per NSDL data, foreign investors sold a net $340.78 million of Indian shares on July 31

** NSDL data shows foreign investors bought a net $203.9mln worth of Indian bonds on July 31

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