Rupee to ride Asia FX rally on US-China trade cheer
MUMBAI, June 30 (Reuters) - The Indian rupee is likely to be well supported at open on Monday, aided by the strength in Asian currencies following positive trade-related developments between the U.S. and China.
The one-month non-deliverable forward suggests the rupee , which rallied 1.3% last week to 85.4750 per U.S. dollar, will open slightly firmer. Last week's move marked the rupee's best weekly performance in over two years, fuelled by the plunge in oil prices and continued weakness in the dollar.
The rupee's bias remains skewed to upside after last week's clean break below 85.80, a currency trader at a Mumbai-based bank said.
There is likely to be "good supply on upticks" on the dollar/rupee pair, he said, pegging support at 85.30 and then at 85.
The offshore Chinese yuan inched up at 7.16 to the dollar and it is not too far away from its year-to-date high. The South Korean won added 0.5%, the top performer among major Asian currencies.
Optimism over the U.S. trade deals and mounting expectations of the Federal Reserve's rate cuts boosted Asian currencies. The White House said on Thursday it had signed an agreement with China to accelerate rare earth approvals.
Hours later, Beijing said both sides had agreed on the terms of the deal reached in London earlier this month, developments investors took to signal progress.
Meanwhile, U.S. economic data on Friday added to the case for the Fed rate cuts this year, particularly against the backdrop of progress on the trade front.
U.S. real consumer spending was softer than expected, leading our economists to revise down their real GDP growth tracking to 2.0% from 2.1%, Morgan Stanley said in a note.
Following the data, traders increased bets that the Fed will cut short-term borrowing costs by a total of 75 basis points in 2025, with the first move likely in September.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 85.55; onshore one-month forward premium at 10.5 paise
** Dollar index down at 97.18
** Brent crude futures down 0.3% at $67.6 per barrel
** Ten-year U.S. note yield at 4.28%
** As per NSDL data, foreign investors bought a net $1,243.5 million worth of Indian shares on June 26
** NSDL data shows foreign investors bought a net $71.7 million worth of Indian bonds on June 26
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