Relief for Asian peers may slightly aid rupee but portfolio outflows weigh

The Indian rupee is expected to linger near its all-time low on Monday, wedged between positive cues on mild gains in its regional peers, while persistent foreign portfolio outflows keep a lid on the currency's upside.

The 1-month non-deliverable forward indicated that the rupee will open near 84.40 against the US dollar compared with 83.3950 in the previous session. The currency had weakened to its all-time low of 84.4125 last week.

Asian currencies were mostly higher between 0.1 per cent to 0.3 per cent on day while the dollar index was a tad lower at 106.6 after declining 0.2 per cent on Friday.

 

The rupee is likely to see "another week of shallow price action," a trader at a state-run bank said. The trader expects the central bank's interventions to offer firm resistance to rupee bears near 84.50 levels.

A rally in the dollar and the rise in US bond yields following Donald Trump's victory in the US election has weighed on Asian currencies over the last two weeks, including the rupee.

Analysts reckon Trump's touted policies of tariffs, reduced immigration and debt-funded tax cuts will be inflationary, thereby limiting the scope for further interest rate cuts by the Federal Reserve. The 10-year US Treasury yield touched a more than 5-month peak of 4.50 per cent on Friday.

Fed Chair Jerome Powell said last week that there was no need for the central bank to rush to cut rates.

The cautious message from Powell "failed to provide the dollar with further upside impetus which could be an early signal of the Trump-related dollar buying is fading", MUFG Bank said in a note.

In addition to the global cues, the rupee has also been weighed down by sustained portfolio outflows. Foreign investors have pulled out over $3 billion from local stocks and bonds in November, adding to the $11.5 billion outflow last month.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 84.51; onshore one-month forward premium at 11 paisa

** Dollar index down 0.1 per cent at 106.63

** Brent crude futures up 0.4 per cent at $71.3 per barrel

** Ten-year US note yield at 4.43 per cent

** As per NSDL data, foreign investors sold a net $160.2mln worth of Indian shares on Nov. 13

** NSDL data shows foreign investors sold a net $15mln worth of Indian bonds on Nov. 13