Rupee winning run may pause on dollar strength before key Fed member`s speech
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The Indian rupee is expected to open slightly lower on Tuesday, pressured by the U.S. dollar's advance on weak risk appetite and heading into Federal Reserve official Christopher Waller's speech.
Non-deliverable forwards indicate rupee will open at around 82.92-82.94 to the U.S. dollar compared with 82.88 in the previous session.
The local currency ended higher for the ninth straight session on Monday, reaching a more than four-month high.
USD/INR "may very well be better bid at open", but unlikely that the 83 handle "will be visited", an FX trader at a bank said.
The USD/INR "remains in a downtrend for now", and "a sell on rallies" and the opening uptick does not change that," the trader added.
Asian currencies were down 0.2% to 0.6% and the dollar index rose to 102.84 in wake of the losses on Asian shares and U.S. equity futures. A pushback from central bank officials on rate cuts soured risk appetite and pushed yields higher.
"Market expectations of large ECB (European Central Bank) rate cuts this year are generating pushback from officials," DBS Research said in a note.
European shares dropped on Monday and the 2-year U.S. Treasury yield rose to 4.20% in Asian hours.
Federal Reserve Board Governor Waller's speech, due later on Tuesday, will be in focus. His comments in late November had investors more convinced that the Fed will pivot toward rate cuts, stoking a rally in equities and bonds.
"In the context of what ECB officials said yesterday and the extent of Fed cuts that have been prized, Waller's comments will be extremely critical," the FX trader said.
Investors have priced in a near 80% chance of Fed rate cut in March and expect the central bank to cut the rate in nearly each of the successive meetings this year.
Meanwhile, higher exports helped India's merchandise trade deficit come in lower than expected at $19.8 billion in December.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.02; onshore one-month forward premium at 10 paise ** Dollar index up at 102.82 ** Brent crude futures at $78.1 per barrel ** Ten-year U.S. note yield rises to 4%** As per NSDL data, foreign investors sold a net $51.9mln worth of Indian shares on Jan. 12
** NSDL data shows foreign investors bought a net $314.8mln worth of Indian bonds on Jan. 12
