MUMBAI: The Indian rupee is expected to open slightly lower versus the dollar on Tuesday after the offshore Chinese yuan tumbled to a lifetime low.

The rupee is tipped to open at around 82.74-82.76 per US dollar, compared with 82.6750 on Friday. Indian financial markets were off on Monday.

The offshore yuan dropped to a record low of 7.3650 to the dollar on Tuesday after the People’s Bank of China’s daily fix prompted speculation that the central bank may allow a market determined exchange rate.

The PBOC set the mid-point at 7.1668 compared to a Reuters estimate of 7.1348.

The yuan was already under pressure as investors dumped Chinese assets after President Xi Jinping’s new leadership team raised fears growth will be sacrificed for ideology-driven policies.

Chinese and Hong Kong equities extended Monday’s fall. On Monday, the Hong Kong’s main index plunged more than 6%.

Meanwhile, the dollar index dipped in Asia trading, adding to is recent losses on bets that the US Federal Reserve will deliver a small rate hike in December.

Fed officials are entertaining a 50-basis points rate hike in December, and they would want to prepare investors for such a decision in the weeks after the Federal Open Market Committee meeting in November, the Wall Street Journal said on Friday.

Indian rupee posts sixth weekly decline

The odds of a 50-bps rate hike in Dec is now at about 55%, according to the CME FedWatch Tool. If it were not for yuan, the rupee would have had “had a decent opening” considering the “slightly less” hawkish Fed outlook, a trader at a Mumbai-based bank said.

He pointed out that the 1-month non-deliverable forward had dropped to about 82.75 on Friday after the WSJ report.

Another fall in India’s foreign exchange “is probably another problem” for the rupee, the trader said. The country’s forex reserve dropped $4.5 billion to $528.4 billion in the week through Oct 14.