MUMBAI (Reuters) – The Indian rupee is likely to open slightly higher on Wednesday tracking non-deliverable futures, but higher crude oil prices and nearby support for the USD/INR are likely to cap the upside.
Non-Deliverable Futures (NDF) suggest the rupee will open at around 82.86-82.90 to the US dollar compared to 82.9225 in the previous session.
Brent crude reached a 10-month high of $92.40 in the New York session on Tuesday amid supply concerns, and is now up 6% since the start of the month.
Meanwhile, the dollar index was barely changed at 104.60, while Asian currencies and stocks were mixed.
NDF points to a slightly lower open on USD/INR, “but considering oil prices and support at 82.80”, it will likely be a “struggle” for the rupee to maintain the open, said a forex trader at a bank. He said.
He added that India’s lower-than-expected inflation reading was positive for the rupee “at the margin”.
The central bank intervened in the last half hour of regular over-the-counter trading hours on Tuesday, which was positive for the rupee, two traders at a private bank said.
India’s CPI-based inflation data released on Tuesday showed year-on-year inflation at 6.83%, lower than Reuters’ estimate of 7%.
“The CPI data will confirm the MPC’s position of considering the supply-side inflation shock… We expect the MPC to acknowledge these positive developments and ease its inflationary concerns,” Citibank said in a note.
Focus now turns to US inflation data due later in the day. The core CPI is expected to rise 0.2% month-on-month in August, at the same rate as July, according to a Reuters poll.
“Core inflation, which has been more stable… can now benefit from more beneficial base effects,” ING said in a note.
Main indicators:
** 1 month non-deliverable Rs 82.98; One month deferred installment at 10 baisa
** September USD/INR futures settled at 83.0025 on Tuesday
**September forward premium in USD/INR at 5 piasters
** Dollar index at 104.64
** Brent crude futures rose 0.1% to $92.1 per barrel
** The yield on ten-year US bonds at 4.29%
** According to NSDL data, foreign investors bought a net $177 million worth of Indian stocks on September 11.
** NSDL data shows that foreign investors sold a net $78.1 million worth of Indian bonds on September 11.
Nimesh reports immediately. Edited by Mrigank Dhaniwala
Our standards: Thomson Reuters Trust Principles.