By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee is expected to open nearly unchanged on Monday and trade with a slightly positive bias on the back of gains in most of its regional peers, while traders await comments from Federal Reserve Chair Jerome Powell for rate-cut clues.
The 1-month non-deliverable forward indicated that the rupee would open around 83.68-83.70 against the U.S. dollar, nearly flat from its close at 83.70 on Friday.
Most Asian currencies were trading higher, with the Malaysian ringgit leading the gains with a 0.5% rise, while the offshore Chinese yuan held above 7 per U.S. dollar, close to its highest level since May last year.
Despite positive regional cues, traders expect the rupee’s gains to be muted in the face of month-end dollar demand from local importers.
The rupee is on course to log its best monthly performance since January, boosted by strong risk appetite after the Fed kicked off its rate-cut cycle and plentiful portfolio inflows.
Overseas investors have net bought nearly $11 billion of local bonds and equities in September so far, the highest monthly inflow on record, according to stock depository data.
Likely absorption of dollar inflows by the Reserve Bank of India helped boost the country’s foreign exchange reserves to a record high of $692.3 billion as of Sept. 20.
Powell’s remarks will be in focus on Monday for cues on the size of the Fed’s next rate cut, likely in November.
Investors will also keep an eye on the Middle East situation after Israel stepped up attacks on Iranian-backed forces.
“For Asian currencies, the key transmission would be through spikes in oil prices, but the offsetting point is the potential move by Saudi Arabia to boost oil production and regain market share hence capping oil prices thus far,” MUFG Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 83.80; onshore one-month forward premium at 12.75 paisa
** Dollar index at 100.4
** Brent crude futures up 0.8% at $72.6 per barrel
** Ten-year U.S. note yield at 3.75%
** As per NSDL data, foreign investors bought a net $1.02 bln worth of Indian shares on Sep. 26
** NSDL data shows foreign investors sold a net $150 mln worth of Indian bonds on Sep. 26
(Reporting by Jaspreet Kalra; Editing by Subhranshu Sahu)
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