By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee, under persistent pressure in recent sessions, is expected to find relief at Monday’s open, lifted by a broad rally in Asian peers.
The 1-month non-deliverable forward indicated the rupee will open in the 88.62-88.64 range versus the U.S. dollar, compared with 88.7175 in the previous session.
The Indian currency shed 0.7% last week, sinking to an all-time low of 88.7975, with the U.S. H1-B visa fee increase adding to bearishness. Without the Reserve Bank of India’s likely support, the fall could have been worse, bankers said.
“What we are seeing is the RBI allowing depreciation in a measured fashion,” a currency trader at a Mumbai-based bank said, “This prevents the market from extrapolating to a free-fall or from taking heavy one-sided bets.”
While the central bank’s action is cushioning the fall, the overall bias for the rupee remains weaker, he noted.
Adding to the rupee’s hurdles, Indian equities last week suffered their sharpest drop in more than seven months, with foreign investors withdrawing nearly $1.8 billion from local shares.
This week, all eyes will be on the RBI’s policy review on Wednesday, where a possible 25-basis-point rate cut may add to pressure on the rupee.
ASIA RALLIES
Asian currencies marched higher on Monday and equities rose following U.S. inflation data. The U.S. personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose 0.3% in August from July, matching forecasts.
The report arrives amid growing expectations that the Fed will cut rates again next month, with a third straight reduction possible in December.
The inflation data “keeps rate cut expectations intact”, Morgan Stanley said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.84; onshore one-month forward premium at 15 paise
** Dollar index down at 97.92
** Brent crude futures down 0.5% at $69.8 per barrel
** Ten-year U.S. note yield at 4.16%
** As per NSDL data, foreign investors sold a net $462.5mln worth of Indian shares on Sep. 25
** NSDL data shows foreign investors sold a net $1mln worth of Indian bonds on Sep. 25
(Reporting by Nimesh Vora; Editing by Ronojoy Mazumdar)
