MUMBAI: The Indian rupee was expected to open higher against the US currency on Monday, tracking a further retreat on the dollar on the back of a positive risk mood.
The rupee is likely to open at around 80.96-80.98, up from 81.12 in the previous session.
The last time the local currency reached above 81 to the dollar was on Dec. 1.
The rupee has managed a decent rally over the last two weeks, helped by the dollar’s continued decline.
Market participants have further pointed to bond inflows and dollar selling in the USD/INR non-deliverable forwards for the rupee’s upward momentum.
A few analysts, however, reckon that the rupee’s current run may have run its course.
There have been some positive cues for the rupee off late. but the upcoming (India) budget is a risk, said Jigar Trivedi, senior research analyst, currencies and commodities at Reliance Securities.
The 81-per-dollar level will act as a tough resistance, he added.
The dollar index fell 0.3% in Asia trading to 101.66, weighed by the buoyant risk sentiment and an uptick in the euro.
The euro rose to 1.0896 to the dollar, helped by hawkish comments by a European Central Bank member and investors pricing in a lower terminal rate from the Federal Reserve.
Indian rupee upside limited by low forward premiums
Meanwhile, Asian equity gauges that were open were trading higher following Friday’s Wall Street rally. Trading in Asia will be impacted by the Lunar New Year holidays; Chinese markets will resume trading next Monday.
The expectations of milder rate hikes from the Fed alongside weak US data are weighing on the outlook for the dollar, according to analysts.
Futures have priced in a smaller 25 basis point hike by the Fed on Feb. 1 and a likely peak of near 4.75% to 5.0% US GDP data and producer price index prints are due later this week.
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