scorecardresearchRupee poised to extend rally on soft dollar index, positive risk mood

Rupee poised to extend rally on soft dollar index, positive risk mood

Updated: 06 Mar 2023, 08:32 AM IST
TL;DR.

The rupee and other Asian currencies this week will be tracking the Federal Reserve Chair Jerome Powell's testimony to congress lawmakers on Tuesday and Wednesday and the monthly U.S. jobs report.

While the focus remains on the US dollar, it is worth pointing out that against other major currencies, including the euro, yen, and sterling, the rupee has strengthened, not weakened, this year (Shutterstock)

While the focus remains on the US dollar, it is worth pointing out that against other major currencies, including the euro, yen, and sterling, the rupee has strengthened, not weakened, this year (Shutterstock)

(Reuters) - The Indian rupee is expected to open higher versus the U.S. currency on Monday, building on last week's rally, helped by the pullback in the dollar index and U.S. yields and an upbeat risk sentiment.

The non-deliverable forwards indicate the rupee will open at around 81.85 to the dollar compared with 81.9650 in the previous session. The local currency climbed about 1% last week, its best weekly performance in eight, helped by equity inflows.

The dollar index was marginally lower in Asia, extending Friday's decline. The recovery in U.S. equities on Friday and the pause in the selloff in Treasuries undermined demand for the dollar. Asian shares followed their U.S. peers higher.

More than the dollar index and U.S. yields, it is the overall momentum that may carry the rupee higher at open, a trader at a Mumbai-based bank said.

The dip at the open on USD/INR could "very well run into a barrage of dollar bids" from importers and public sector banks, he added.

The rupee and other Asian currencies this week will be tracking the Federal Reserve Chair Jerome Powell's testimony to congress lawmakers on Tuesday and Wednesday and the monthly U.S. jobs report.

Both have the potential to impact the outlook for the Fed rate path, which has seen a sizeable hawkish repricing. Investors expect a peak Fed rate of just a few basis points below 5.50% by September and have almost priced out rate cuts this year.

Morgan Stanley said in a note it forecasts U.S. non-farm payrolls to have increased 190,000 in February, "a big step down" from 517,000 in January.

It expects the unemployment rate to hold at 3.4%, the average hourly earnings to increase by 0.3%, and the average workweek to normalize back to 34.5.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.02; onshore one-month forward premium at 20 paise ** USD/INR NSE February futures settled on Friday at 82.0725 ** USD/INR March forward premium at 8.75 paisa ** Dollar index down at 104.48 ** Brent crude futures down 0.7% at $85.2 per barrel ** Ten-year U.S. note yield at 3.9450% ** SGX Nifty nearest-month futures up 0.5% at 17,717 ** As per NSDL data, foreign investors bought a net $1.5 bln worth of Indian shares on Mar. 2

** NSDL data shows foreign investors bought a net $33 mln worth of Indian bonds on Mar. 3

 

 

First Published: 06 Mar 2023, 08:32 AM IST