By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee may slip to a lifetime low on Wednesday ahead of the central bank’s policy decision, with opinion divided on whether the monetary authority will cut rates to bolster growth or maintain status quo.
The 1-month non-deliverable forward (NDF) indicated the rupee will open in the 88.82-88.84 range versus the U.S. dollar, dipping past its all-time low of 88.80 hit on Tuesday.
A Reuters poll showed that nearly three-quarters of economists expect the Reserve Bank of India to keep rates unchanged, with the rest forecasting a 25-basis point cut.
Traders, though, are more or less split down the middle. One camp believes that the expected drag from higher U.S. tariffs on India’s growth will force the RBI to deliver a rate cut this week.
Others reckon that the rupee’s persistent weakness, coupled with signs that the domestic economy is holding up, will prompt the RBI to delay the cut until its December meeting.
“It’s a finely balanced decision, which means the rupee will definitely react,” a currency trader at a Mumbai-based bank said.
“I reckon a rate cut would trigger a bigger move, considering the current price action. If the RBI cuts rates, it would bring the 89 level into play, which in all probability will prompt the RBI to act.”
The central bank appears to be allowing a measured decline in the rupee, bankers say. It has been intervening regularly in the local spot and NDF market without the intent to defend a particular level, they say.
ASIA WEAK
At the open, the rupee will have to contend with a marginal dip in Asian currencies, while the dollar index held just below the 98 handle.
U.S. equity futures dropped on Wednesday, with the clock ticking down to a U.S. government shutdown that would delay the release of crucial jobs data. The shutdown is set to commence at 0400 GMT.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 89.02; onshore one-month forward premium at 14 paise
** Dollar index up at 97.84
** Brent crude futures up 0.2% at $66.1 per barrel
** Ten-year U.S. note yield at 4.15%
** As per NSDL data, foreign investors sold a net $152.6 mln worth of Indian shares on Sep. 29
** NSDL data shows foreign investors sold a net $17.9 mln worth of Indian bonds on Sep. 29
(Reporting by Nimesh Vora; Editing by Sonia Cheema)
