Weaker dollar, dip in US yields of no help to rupee
The Indian rupee is likely to decline at open on Wednesday weighed by the currency's weakness in the non-deliverable forward markets, while being unable to take advantage of the further decline in the dollar index.
The 1-month non-deliverable forward indicated that the rupee will open at 87.14-87.16 to the U.S. dollar compared with 87.0675 in the previous session.
There "does not seem to be a specific reason" for (dollar/rupee) NDF to be higher, a currency trader at a bank said.
"If I had to provide a reason, it's the overall direction, which is higher (on dollar rupee)," the trader said.
The rupee on Tuesday was in the 87.01-87.14 range, having to contend with the news flow on tariffs. The rally to near 87 brought about by the U.S. delaying tariffs on Canada and Mexico was cut short by China's retaliation to U.S. tariffs, to which the initial reaction of investors was to sell the Chinese yuan and avoid risk assets.
That initial reaction faded, helping the rupee recover from the lows of Tuesday's session.
All eyes on Wednesday were on China with markets resuming trade after the Lunar New Year break. The People's Bank of China set a higher-than-expected yuan mid-point.
The onshore yuan was at 7.2832 to the U.S. dollar. Its offshore counterpart has declined past 7.36 on Tuesday.
DOLLAR FALLS FURTHER
The dollar index slipped below the 108 handle after rallying to near 110 on worries over U.S. tariffs on its trading partners. U.S. suspending tariffs on Mexico and Canada interrupted the upward march on the dollar.
"With tariff news flow cooling off for now and no imminent deadlines, the focus will shift back towards the U.S. labour market," DBS Bank said in a note.
Data released on Tuesday showed U.S. job openings fell by the most in 14 months. U.S. yields dropped.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.34; onshore one-month forward premium at 18.5 paise
** Dollar index down at 107.85
** Brent crude futures down 0.4% at $75.9 per barrel
** Ten-year U.S. note yield at 4.5180
** As per NSDL data, foreign investors sold a net $416.5mln worth of Indian shares on Feb. 3
** NSDL data shows foreign investors bought a net $22.6mln worth of Indian bonds on Feb. 3
