Fall in Asia FX weighs on rupee, but near-term view positive

The Indian rupee dipped against the dollar on Thursday on the back of losses in its Asian peers, but some analysts remained constructive on its near-term prospects.

The rupee USDINR was trading at 81.3250 per U.S. dollar by 10:14 a.m. IST, after opening at 81.38. The local currency had closed at 81.24 in the previous session.

Despite the higher opening for USD/INR, the outlook for the dollar is weak, said Amit Pabri, managing director at CR Forex. He cited the poor U.S. data that is leading to a fall in Treasury yields and potential dollar inflows.

The follow-on public offer of Adani Enterprises and the merger of Housing Development Finance Corp (HDFC) and HDFC Bank could lead to dollar inflows, Pabri said.

The merged entity of HDFC and HDFC Bank could result in fresh overseas fund flows of $2.5-$3.0 billion, according to a report by The Economic Times.

For USD/INR, the 81.20 - 81.90 range is in play with a downward bias, said Anindya Banerjee, head research - fx and interest rates at Kotak Securities.

"We would look to sell (USD/INR) on the rise and our stop on the positional shorts will be above 81.90 levels."

Asian currencies struggled on Thursday in the wake of slight risk aversion in the region fuelled by concerns over the growth outlook. The steep decline in U.S. retail sales last month underpinned expectations of an economic slowdown.

Reflecting the growth concerns, both near and far maturity Treasury yields plunged. Meanwhile, expectations of the U.S. Federal Reserve's terminal rate inched down. This is despite the hawkish comments from Fed officials.

Fed policymakers on Wednesday signalled they will push on with more interest rate hikes, with several supporting a top policy rate of at least 5% even as inflation shows signs of having peaked and economic activity is slowing.