Rupee to stay under pressure, all eyes on central bank`s defence of 85.80
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The Indian rupee is tipped to stay under pressure on Monday with the U.S. dollar holding near a two-year peak, while traders will keep an eye on whether the Reserve Bank of India will continue with interventions near 85.80.
The 1-month non-deliverable forward indicated that the rupee will open flat-to-slightly-lower from its closing level of 85.77 on Friday.
The currency had declined to it all-time low of 85.8075 on Dec. 27, prompting strong dollar-selling intervention by the RBI. The central bank had also stepped in last week on multiple occasions to cap the currency's decline near that level.
The rupee has faced persistent headwinds over recent weeks, including a stronger dollar and tepid capital flows alongside concerns about India's slowing economic growth.
"We expect the rupee to remain on a steady depreciation trajectory," said Abhishek Goenka, chief executive at FX advisory firm IFA Global. "Any retracement in USD/INR towards 85.40 can be used to hedge imports," he said.
On the day, other Asian currencies while largely rangebound while the dollar index dipped slightly to 108.8 but continued to hover close to a two-year peak hit last week.
Expectations of a hawkish Federal Reserve and anticipated policy changes under U.S. President-elect Donald Trump have kept the dollar on the front foot, hurting emerging market currencies.
Given how strong the dollar has been "it only seems like a matter of time that it (rupee) touches 86," a trader at a large private bank said, noting that any sharp declines in the yuan will probably prompt the RBI to allow such a move.
The offshore Chinese yuan was last quoted at 7.35 against the U.S. dollar after declining 0.8% last week.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.01; onshore one-month forward premium at 22.50 paisa
** Dollar index lower at 108.86
** Brent crude futures up 0.1% at $76.6 per barrel
** Ten-year U.S. note yield at 4.62%
** As per NSDL data, foreign investors bought a net $193.9 mln worth of Indian shares on Jan. 2
** NSDL data shows foreign investors sold a net $64.7 mln worth of Indian bonds on Jan. 2
