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Rupee will need support from central bank amid possible outflows
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The Indian rupee is expected to hold near all-time lows on Monday amid possible outflows related to the Hyundai Motors India initial public offering and foreign equity outflows.
The one-month non-deliverable forward indicated that the rupee will open barely changed from the last close of 84.0650 and not too far away from the 84.0775 lifetime low.
For the rupee, the dip past 84 after holding near the level for a number of weeks has been fairly uneventful. Last week, the currency traded in a narrow 10-paisa range.
The Reserve Bank of India is trying to make sure that volatility remains muted, intervening regularly to control the pace at which the rupee depreciates. The RBI all through Friday' session supported the rupee, which dipped to an all-time low.
The RBI's defence of the rupee likely spurred the biggest weekly decline in India forex reserves in more than two years. In the week through Oct. 11 when the rupee weakened past 84 for the first time ever, India's forex reserves fell by $10.75 billion, data released by the central bank showed.
The central bank had intervened to manage the impact of foreign outflows. Overseas investors have taken out $9.2 billion from local equities so far this month amid paring of India allocations in favour of China.
"You would think that these outflows are likely to persist this week. In addition, you may have the Hyundai money moving out," a currency trader at a bank said.
He was referring to the Hyundai Motor India's $3.3-billion initial public offering. Its parent Hyundai Motor is likely to take the money out, possibly this week, traders said.
Meanwhile, Asian currencies were mostly higher. China cut its key lending rates, as expected, at the monthly fixing.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 84.18; onshore one-month forward premium at 10.25 paise
** Dollar index down at 103.43
** Brent crude futures up 0.3% at $73.3 per barrel
** Ten-year U.S. note yield at 4.08%** As per NSDL data, foreign investors sold a net $869.1mln worth of Indian shares on Oct. 17
** NSDL data shows foreign investors sold a net $42.6mln worth of Indian bonds on Oct. 17
