Japanese yen-led dollar pullback to offer mild support to rupee at open
The 1-month non-deliverable forward indicated the rupee will open in the 86.20-86.22 range, versus 86.2925 in the previous session.
On Monday, the Indian rupee weakened to 86.35 per dollar, its lowest level in a month, extending its losing streak to four sessions. Bankers attributed the decline to sustained dollar demand from importers and positioning in the non-deliverable forward (NDF) market. A lack of equity inflows has added to the pressure on the currency.
The trading range on USD/INR "has probably shifted higher," with the 86.00–86.10 now acting as a support zone, a currency trader at a Mumbai-based bank said.
"Interbank is more inclined to buying dips than trying to call the top," the trader added.
The rupee at open is likely to find some support from the drop in the dollar index, which slid 0.62% on Monday — its steepest fall in over a month.
The decline was spurred by a 1% jump in the yen. While the ruling coalition lost its majority, Prime Minister Ishiba's remarks that he would stay offered comfort to the yen, analysts said.
Outside the yen, other Asian currencies were mixed on Tuesday, with the focus squarely on any progress on trade talks before the August 1 deadline for countries to strike deals with the U.S. or face high tariffs.
Focus will also be on the outlook for Federal Reserve rate cuts. Last week, Fed Governor Christopher Waller signalled he may dissent at next week's meeting, where policymakers are widely expected to keep rates unchanged.
"Waller remains in the distinct minority of two. We'll likely need to see very soft data, especially on the labour market, to convince investors that early cuts are on the table," ING Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.32; onshore one-month forward premium at 11.50 paisa
** Dollar index at 97.88
** Brent crude futures down 0.8% at $68.6 per barrel
** Ten-year U.S. note yield at 4.38%
** As per NSDL data, foreign investors bought a net $90.7 million worth of Indian shares on July 18
** NSDL data shows foreign investors sold a net $41.9 million worth of Indian bonds on July 18
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