Rupee to open higher tracking NDFs, BoJ in focus

The Indian rupee is likely to inch up against the dollar on Wednesday, helped by the decline in the USD/INR non-deliverable forwards (NDF).

The rupee USDINR is expected to open at around 81.60 compared with 81.76 in the previous session. Over the last two sessions, the local currency has come under pressure on dollar purchases from public sector banks and on position adjustments by speculators.

The USD/INR 1-month NDF declined after normal over-the-counter market hours on Tuesday, hovering near 81.70. On the interbank order match system, rupee USDINR was last dealt at 81.60.

The rupee, taking cues from NDF, should inch up at open, but is unlikely to do much after that considering the Asian cues, a trader at a Mumbai-based bank said. It looks like the rupee is now in a new range of 81.20 to 82.00, he added.

Moat Asian currencies were slightly weaker on the day. The offshore Chinese yuan dropped to 6.78 to the dollar while the Japanese yen plunged just less than 2% to 130.40 to the dollar.

The Bank of Japan maintained ultra-low interest rates, including its 0.5% cap for the 10-year bond yield, defying market expectations it would phase out its massive stimulus programme in the wake of rising inflationary pressure.

Japanese shares jumped following the decision, while U.S. equity futures recouped losses and were slightly higher.

KEY INDICATORS:

** One-month non-deliverable rupee (INRNDFOR=) forward at 81.70; onshore one-month forward premium at 13.75 paise

** USD/INR NSE January futures settled on Tuesday at 81.8250

** USD/INR January forward premium (INR1FC=) at 4.5 paise

** Dollar index DXY slightly up at 102.58

** Brent crude futures BRN1! rises to $86.46 per barrel

** Ten-year U.S. note yield falls to 3.5088%

** SGX Nifty (SINc1) nearest-month futures up 0.2% at 18,112

** As per NSDL data, foreign investors net bought $193 million of Indian shares on Jan 16

** NSDL data shows foreign investors net bought $50.28 of Indian bonds on Jan 16