MUMBAI: The Indian rupee is likely to open weaker on Wednesday after upbeat US economic data lifted US bond yields, prompting the dollar to resume its uptrend.
The one-month non-deliverable forward indicated that the rupee will open at 85.80-85.81 to the US dollar, compared with 85.7125 in the previous session.
The dollar index dipped during Asia trade to 108.5 after rising 0.3% on Tuesday as data showed that job openings in the US grew to 8.098 million, exceeding forecasts for a 7.7 million rise, while services sector activity also accelerated.
The greenback had dipped to is lowest level in a week on Monday as traders assessed whether US President-elect Donald Trump’s tariff policies would match his aggressive rhetoric.
The data, alongside a supply of $39 billion worth of 10-year US bonds, prompted the 10-year Treasury yield to rise about 8 basis points to 4.69%, its highest level since April last year.
Persistent strength in the US dollar, concerns over India’s slowing economic growth and tepid capital flows have pressured the rupee in recent weeks.
Foreign investors have net sold nearly $2 billion worth of Indian stocks and bonds over January so far, while India has pegged its forecast for annual growth in the year ending in March at 6.4%, the slowest pace in four years, per data released on Tuesday.
“Juxtaposing less favourable global catalysts (slippery yuan included) and domestic drivers, we expect the rupee to lose ground this quarter,” DBS Bank said in a note.
Indian rupee logs biggest one-day gain in over a month
“Rupee traders have been keen to assess the new RBI (Reserve Bank of India) Governor’s view on the currency since he assumed office last month.
Recent INR price action points to a higher tolerance for a weaker exchange rate,“ it said.
Asian currencies were mostly weaker on Wednesday, with the offshore Chinese yuan trading lower at 7.34.
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