MUMBAI: The Indian rupee is likely to open slightly higher against the US dollar on Wednesday, following a bit of moderation in aversion to riskier assets.

The rupee is expected at around 82.66-82.70 at open compared with 82.7550 on Tuesday.

The local currency in the last three days has run into support at 82.85-82.90.

Public sector banks have been selling dollar around that level, fuelling speculation of the Reserve Bank of India’s (RBI) presence.

Upside (on USD/INR) is protected (by public sector banks) and there is not much appetite to take the pair lower, a trader at a Mumbai-based bank said.

A 82.50 to 83.00 range is likely to play out for the rest of the month, he said.

Asian equities were mostly higher following the slide post after the Bank of Japan’s (BOJ) hawkish shift, while US equity futures advanced. The dollar index was hovering near 104, helped by the pullback in the Japanese yen after Tuesday’s rally.

The yen jumped 3.8% against the dollar on Tuesday after BOJ decided to allow the 10-year bond yield to move 50 basis points (bps) either side of its 0% target, wider than the previous 25 bps band.

Indian rupee falls on risk-off, higher US yields post BOJ policy tweak

The investors are assessing how interest rates will pan out next year after the US Federal Reserve, the European Central Bank and BOJ have all adopted a hawkish tone.

The hawkish outlook has prompted increased concerns on growth. US yields have resumed their upward march with the 10-year now above 3.70%, about 30 bps above its recent low.

Rising US yields, potential risk aversion and China coronavirus concerns are all negative for the rupee and the bias remains towards more depreciation, said Srinivas Puni, managing director at QuantArt Market Solutions.