MUMBAI: The Indian rupee is expected to strengthen against the dollar on Tuesday as Asian markets attempt to shake off jitters from a banking crisis in the United States and Europe.

The non-deliverable forwards indicate the rupee will open at around 82.50-82.55 to the US currency compared with 82.6350 in the previous session.

Asian equities like Singapore and Australian shares were up over 1%, tracking a rally in US shares overnight and as European banking stocks recovered earlier losses.

The dollar index fell to 103.340. UBS Group’s state-backed takeover of Credit Suisse and funding pledges from the world’s top central banks seemed to quell immediate fears of a contagion.

“Markets remain nervous, but the rapidity of policymakers’ response to the evolving banking sector risks is heartening,” said Alvin Tan, Head of Asia FX Strategy at RBC Capital Markets.

Policymakers from Washington to Europe have asserted that the current turmoil is different than the global financial crisis 15 years ago as banks are better capitalised and funds more easily available.

However, worries that other struggling banks could fail persisted as global central banks may have to keep raising rates to tame inflation - which had triggered the collapse of US-based mid-sized lenders in the first place.

San Francisco-headquartered First Republic Bank shares sank 47% overnight.

Indian rupee seen little changed tracking Asian markets; CS fallout eyed

US Treasury yields rose as investors weighed the chances of whether the Federal Reserve will skip raising interest rates on Wednesday amid the crisis.

Fed funds futures showed the odds of the central bank holding rates or hiking by 25 basis points (bps) were nearly even, with about 80 bps worth of cuts possible this year.

Before the banking crisis began two weeks ago, markets were expecting a 50 bps hike from this meeting and a peak Fed rate of somewhere around 5.50%.