(Reuters) - The Indian rupee is expected to open higher versus the dollar on Wednesday tracking a fall in oil prices that dropped to their lowest level since mid-February amid concerns over global growth outlook.
The rupee, which is set to resume trade after a four-day weekend, is seen opening at 79.25-79.30 per dollar, up from 79.6550 on Friday.
Brent crude futures on Tuesday declined about 3% to slip to near $92 a barrel, on concerns over a potential global economic slowdown while traders awaited clarity on talks to revive a deal that could allow more Iranian oil exports.
The pullback in oil prices - at levels seen before Russia's invasion of Ukraine - are expected to alleviate concerns over India's record trade deficit and inflation outlook.
India's trade deficit for July was at $30 billion, while consumer inflation has remained above the Reserve Bank of India's upper tolerance limit for seven straight months.
A trader at a foreign bank said that the "more oil falls, the less will be the need to hedge for extreme downside on the rupee".
The combination of soft oil prices, high U.S. Treasury yields and healthy risk appetite suggests the rupee will remain in a 78.50-80 per dollar trading band, he added.
The U.S. Treasury yields rose on Tuesday amid bets that the U.S. Federal Reserve was unlikely to significantly alter its hawkish stance despite the July inflation data.
Policymakers have indicated that they will continue to increase interest rates to ward off the inflation threat.
The Fed July meeting minutes are due on Wednesday. The 10-year Treasury yield is above levels at which it was prior to the softer-than-expected U.S. inflation data while the 2-year yield is almost at the same levels.
The dollar index was flat ahead of the Fed minutes.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 79.43; onshore one-month forward premium at 21.5 paise
** USD/INR NSE August futures closed on Friday at 79.82
** USD/INR forward premium as of Aug. 12 for end current month is 7.5 paise
** Dollar index little changed at 106.40
** Brent crude futures up 0.4% at $92.7 per barrel after falling 3% on Tuesday
** Ten-year U.S. note yield at 2.82%, India 10-yr bond yield at 7.289%
** SGX Nifty nearest-month futures up 0.2% at 17,895
** As per NSDL data, foreign investors bought a net $282.9 mln worth of Indian shares on Aug. 11
** NSDL data shows foreign investors bought a net $19.9 mln worth of Indian bonds on Aug. 11