MUMBAI: The Indian rupee, having suffered its worst day in three weeks in the previous session, is poised to open marginally higher on Thursday helped by a fall in U.S. yields and a range-bound dollar.
The 1-month non-deliverable forward indicated that the rupee will open at 87.14-87.16 to the U.S. dollar compared with 87.21 on Tuesday. Indian financial markets were closed on Wednesday.
The rupee dropped 0.6% in the previous session on the back of dollar demand tied to the expiry of derivatives contract, according to bankers.
The Reserve Bank of India had to step in to support the currency.
After Tuesday’s “decent” decline, “it would be normal to see a bit of hesitancy” to push the rupee further down, a currency trader at a bank said.
“Having said that, the direction is very apparent and we should see 87.50 shortly,” he said.
The rupee will take mild comfort from the ongoing rally in the U.S. Treasuries, which pushed the 10-year yield to the lowest in more than two months on Tuesday.
The 10-year yield is now 50 basis points off the January highs and near the pre-U.S. election level.
Indian rupee little changed
Signs of deceleration in the U.S. economy and uncertainty about President Donald Trump’s tariffs have prompted investors to pile into U.S. Treasuries.
Trump on Wednesday rekindled hopes for yet another one-month pause on new tariffs on imports from Mexico and Canada, saying they could take effect on April 2.
The market has reduced tariff-related risk premium for now, MUFG Bank said in a note. The bank reckons the market is “currently underpricing the risk of more U.S. tariff actions in the coming months.”
The dollar index is well off its recent peak amid the drop in U.S. yields.
American Dollar Exchange Rate