Rupee caught between US dollar weakness, lack of directional bias
By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee is likely to open slightly weaker on Tuesday and is expected to hold a narrow range through the day amid a struggling U.S. dollar and the lack of momentum on either side.
The 1-month non-deliverable forward indicated an open in the 85.40-85.44 range, versus the close of 85.3825 in the previous session.
Non-deliverable forwards suggest the rupee is unlikely to benefit from the up-move in regional peers. The offshore Chinese yuan (CNH=) inched higher past the 7.20 level against the dollar, while the Korean won, Malaysian ringgit, and Indonesian rupiah each rose about 0.3%.
"Yesterday, the situation was reverse — the rupee outperformed most Asian peers," said a currency trader at a Mumbai-based bank, adding that overall, the rupee was "simply lacking direction".
"We're in a phase where speculative interest has diminished, leading to largely range-bound sessions. Any meaningful move is likely to come only post the two key events on Friday.'
On Friday, the Reserve Bank of India is expected to deliver its third successive interest rate cut - a 25-basis-point cut - on the back of benign inflation data. Later in the day, the release of the U.S. non-farm payrolls report for May will offer fresh insight into the health of the U.S. labour market amid ongoing tariff-related uncertainty.
Softer non-farm payrolls data could reinforce expectations of a potential Federal Reserve rate cut, keeping the dollar index under mild downward pressure, HDFC Bank said in a note.
The U.S. dollar has been under pressure for much of the year, weighed down by policy uncertainty and, more recently, concerns over the fiscal deficit.
The dollar index (=USD) is currently trading just 1% above its year-to-date low. Concerns about tariff-related turbulence has resurfaced, adding to the dollar's headwinds.
U.S. President Donald Trump signalled plans to double tariffs on steel and aluminium, while U.S.-China trade relations remain uncertain.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 85.54; onshore one-month forward premium at 14.25 paisa
** Brent crude futures up 0.5% at $65 per barrel
** Ten-year U.S. note yield at 4.45% ** As per NSDL data, foreign investors sold a net $585.4 million worth of Indian shares on May 30
** NSDL data shows foreign investors sold a net $712.3 million worth of Indian bonds on May 30
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