MUMBAI: The Indian rupee is poised to open higher on Monday, extending last week’s gains, amid dollar-selling interest in the non-deliverable forward market.
The one-month non-deliverable forward (NDF) indicated that the rupee will open at 83.48 to the U.S. dollar, compared with its close of 83.5625 in the previous session.
Last week, the rupee rose 0.4%, its best performance this year, staging a recovery after meandering close to an all-time low of near 84 for several sessions.
The rupee hit its highest since mid-July last week, boosted by the Federal Reserve’s 50-basis-point rate cut, which most economists had not expected, as well as portfolio inflows and dollar selling in the NDF.
The NDF dollar selling is likely related to position adjustments and it’s “difficult to know how much further it will run”, a currency trader at a bank said.
The dollar/rupee pair should “ideally have huge” support below 83.50 and it “be very surprising” if that level is broken convincingly, he said.
Asia FX rally pauses
The rupee’s Asian peers were mostly down to begin the week, taking a breather after last week’s rally. The dollar index inched higher.
Still, the outlook for the dollar remains challenging amid the likelihood that the Fed will follow up its 50-bps rate cut with one more of the same magnitude in November.
On Friday, Fed officials, in their first public comments since the rate cut, laid out the depth of the debate over the move, with one governor saying inflation was now so weak that the large reduction was needed.
U.S. jobless claims and personal consumption expenditure (PCE) price index reports will be parsed this week for cues on what the Fed will do next.
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