MUMBAI (Reuters) -The Indian rupee is set to weaken at the open on Tuesday, mirroring losses in the offshore Chinese yuan, triggered by soft economic data and the daily central bank fix.
The 1-month non-deliverable forward indicated that the rupee will open at 84.40-84.42 to the U.S. dollar compared with 84.25 in the previous session.
Recent price action suggests “sizeable” buying interest in USD/INR in the 84-84.25 range, a currency trader at a Mumbai-based bank said. Further, the rupee appears more vulnerable than usual to moves in Asian currencies, especially the yuan, he added.
The offshore Chinese yuan dropped 0.5% to weaken to 7.2350 to the U.S. dollar. The offshore yuan had hit a multi-month high of 7.1832 on Monday.
The People’s Bank of China’s yuan midpoint deviation from the neutral forecast narrowed to -500 pips from -700 pips, which analysts said was a sign that the central bank wants to curb rapid appreciation in the yuan.
Meanwhile, China’s services activity expanded at the slowest pace in seven months in April, weighed down by uncertainty caused by U.S. tariffs, a private sector survey released on Tuesday showed, dampening demand for the yuan.
Other Asian currencies dropped alongside the yuan. The Malaysian ringgit declined 0.8% and the Indonesian rupiah slipped 0.3%. The Taiwanese dollar dropped 3%.
The decline in Asian currencies came after a recent rally on optimism that the worst of the U.S. tariff concerns had passed. Both the U.S. and China have signalled a willingness to resume trade talks, while President Donald Trump indicated that Washington is pursuing trade deals with India, South Korea, and Japan.
The rupee, buoyed by the rally in Asian currencies, had strengthened to 83.77 last Friday before the Reserve Bank of India intervened to cap further appreciation.
The 83.75-83.80 level marks the near-term bottom for the USD/INR pair, a currency trader said.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 84.54; onshore one-month forward premium at 18 paise
** Dollar index at 99.84
** Brent crude futures up 1.4% at $61.1 per barrel
** Ten-year U.S. note yield at 4.35%
** As per NSDL data, foreign investors bought a net $334.7 million worth of Indian shares on May 2
** NSDL data shows foreign investors sold a net $55.2 million worth of Indian bonds on May 2
(Reporting by Nimesh Vora; Editing by Sonia Cheema)
By Nimesh Vora
