By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee is likely to open on the backfoot on Monday, with the previous session’s move still echoing through markets and softness across its Asian peers compounding the strain.
The 1-month non-deliverable forward indicated the rupee will weaken past 89.50 versus the U.S. dollar, after sliding 0.9% on Friday to 89.48.
The rupee’s break past the 88.80 level on Friday, a level the Reserve Bank of India had held for weeks through repeated intervention, has left traders bracing for follow-through pressure at Monday’s open.
When a key level breaks, the impact usually plays out over a few sessions with the market “feeling out” a new range, a currency trader at a private-sector bank said.
A break essentially forces participants to rethink the rupee’s near-term bands and the RBI’s reaction function, keeping price action choppy until the market settles into a fresh equilibrium, he added.
The rupee’s decline on Friday came just days after India reported a sharply wider October trade deficit of $41.7 billion.
YES Bank noted that the larger-than-expected deficit, together with weak net financial flows, is keeping pressure on the currency. The bank expects only moderate weakness through the remainder of the current fiscal year, which runs until March 2026, arguing that a significant part of the adjustment has already occurred.
ASIA FX OFFERS NO SUPPORT
Softness across Asian currencies at open on Monday adds to the rupee’s headwinds. Asian currencies were down 0.1% to 0.3% despite risk appetite showing tentative signs of improvement.
U.S. shares recovered on Friday and futures suggest the move might extend. Asian shares tracked higher, led by more than 1% rise in Australia, Hong Kong and South Korea. [MKTS/GLOB]
Risk appetite was boosted by remarks from influential Fed policymaker John Williams, who said on Friday that rates can fall “in the near term”, boosting the likelihood of a 25 basis interest rate cut next month.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 89.70-89.75; onshore one-month forward premium at 13.25 paisa
** Dollar index at 100.20
** Brent crude futures down 0.1% at $62.5 per barrel
** Ten-year U.S. note yield at 4.07%
** As per NSDL data, foreign investors bought a net $50.7 million worth of Indian shares on Nov. 20
** NSDL data shows foreign investors bought a net $8.3 million worth of Indian bonds on Nov. 20
(Reporting by Nimesh Vora; Editing by Rashmi Aich)
