Rupee may open tad lower tracking Asian peers; equity flows in focus
The Indian rupee is tipped to open slightly weaker to the dollar on Thursday, as most Asian currencies extended losses incurred after data showed an unexpected rise in U.S. inflation in August.
The rupee is expected at around 79.50-79.55 in initial trades, a shade lower than 79.44 in the previous session. The local unit on Wednesday suffered its biggest decline in more than a month on concerns over the pace of U.S. Federal Reserve interest rate hikes.
The rupee’s outlook “is weak” as the market adjusts “to the new reality” on Fed, a trader at a Mumbai-based bank said. Traders will be watching closely the impact the Fed’s rate view has on the recent revival in foreign portfolio flows, the dealer added.
Foreign investors were net sellers of local shares worth 13.9 billion rupees ($174.86 million) on Wednesday, according to preliminary data on the BSE website. Prior to Wednesday, overseas investors have been net buyers of $1.2 billion of Indian equities in this month.
The dollar index inched higher to 109.70, while most Asian currencies slipped. The focus remains firmly on the size of the Fed’s rate hike next week, following an upward surprise on the U.S. consumer inflation data..
The odds of one percentage point rate hike next week have come off slightly to 1-in-4.
Risk appetite was slightly better. U.S. shares inched higher overnight and futures on the S&P 500 Index rose. SGX Nifty indicated a positive opening for Indian equities.
Indian shares and the rupee held up well relative to rest of Asia on Wednesday.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 79.68; onshore one-month forward premium at 19.5 paise ** USD/INR NSE Sept. futures settled at 79.62 on Wednesday ** USD/INR forward premium for current month at 8 paise ** Dollar index up at 109.70 ** Brent crude futures down 0.1% at $94 per barrel ** Ten-year U.S. note yield at 3.41%, India 10-yr bond yield at 7.16% ** SGX Nifty nearest-month futures up 0.3% at 18,050 ** As per NSDL data, foreign investors bought a net $578.5mln worth of Indian shares on Sept. 13
** NSDL data shows foreign investors bought a net $93.9mln worth of Indian bonds on Sept. 13 (Reporting by Anushka Trivedi and Nimesh Vora; Editing by Rashmi Aich)