By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee is expected to stick to a narrow band on Thursday, with unfavourable flows offset by the central bank’s unwillingness to allow a decline past the 88.80 level.
The 1-month non-deliverable forward pointed to the rupee opening little changed to the U.S. dollar from 88.63 on Wednesday.
The currency stayed stuck in a ten-paisa range on Wednesday, extending a subdued week in which the band has been only 20 paisa. Last week was not any more lively, stuck between 88.40 and 88.80.
The Reserve Bank of India has been holding the line at 88.80 for well over a month, repeatedly stepping in to stop any break past that level.
Bankers say this has effectively capped the rupee’s downside at a time when it is facing persistent dollar demand from importers, weak portfolio flows, and Asian cues that haven’t been particularly supportive.
Foreign investors have pulled nearly $1 billion from Indian equities so far this month, taking this year’s total outflow to about $17 billion.
The recent price action “makes it obvious” that flows “are terrible” from the rupee’s perspective, a currency trader at a private bank said.
“Combine that with the RBI defending 88.80, and you’re looking at more stuck-in-a-range trading,” he said.
Bankers remain focused on the U.S.–India trade deal, seen as a major catalyst that could spark a meaningful reversal in the rupee.
Meanwhile, Asian currencies were mostly weaker on the day while the dollar index was hovering near 99.50 with markets factoring that the U.S. federal shutdown is about to wrap up.
U.S. President Donald Trump, who was expected to host Wall Street executives for dinner on Wednesday, would sign a bill to end the shutdown at 0245 GMT, the White House said. This is after the U.S. Congress voted to end the longest government shutdown on record.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.77; onshore one-month forward premium at 13.5 paise
** Dollar index up at 99.5
** Brent crude futures down 0.1% at $62.7 per barrel
** Ten-year U.S. note yield at 4.09%
** As per NSDL data, foreign investors bought a net $245.9mln worth of Indian shares on Nov. 11
** NSDL data shows foreign investors bought a net $29.9mln worth of Indian bonds on Nov. 11
(Reporting by Nimesh Vora; Editing by Rashmi Aich)
