Rupee may struggle on higher US bond yields, weak Asian cues

The Indian rupee is expected to broadly struggle on Thursday amid an uptick in U.S. Treasury yields and losses on Asian currencies and equities before the U.S. GDP data.

Non-deliverable forwards indicate the rupee USDINR will open marginally weaker to nearly flat to the U.S. dollar from 83.3225 in the previous session.

The rupee, having slipped to an all-time low of 83.5750 on Friday, has broadly done well. The cooling off of the Iran-Israel crisis and inflows have helped the local currency recover.

"Think 83.25-83.55 is now the range (on USD/INR)," a FX trader at a bank said. "You have two important U.S. data points lined up and then the Fed meeting next week. Heading into that, for me its difficult to pen where the balance of risks are."

The Federal Reserve meeting is on April 30-May 1. Before that, the U.S. first quarter GDP number will be out later on Thursday and the March core PCE data is due for release on Friday.

Resilient U.S. growth and higher inflation are reasons why several Fed officials have repeatedly emphasized the need to be patient on rate cuts. Investors are now pricing in less than two rate cuts this year. (FEDWATCH)

HSBC expects the Fed to keep policy rate unchanged in May and said that economic growth and core inflation data over the months ahead will likely impact policy in June and beyond.

Asian currencies were trading down 0.1% to 0.6% and shares dropped alongside U.S. equity futures. Asian currencies have struggled so far this year on investors dialling back their expectations around Fed rate cuts.

The Korean won, the Thai baht and the Taiwanese dollar are down 6% to 7% this year.

KEY INDICATORS:

** One-month non-deliverable rupee (INRNDFOR=) forward at 83.42; onshore one-month forward premium at 7.5 paise

** Dollar index DXY at 105.76

** Brent crude futures BRN1! up 0.1% at $88.1 per barrel

** Ten-year U.S. note yield at 4.66%

** As per NSDL data, foreign investors sold a net $414.8 mln worth of Indian shares on Apr. 23

** NSDL data shows foreign investors sold a net $224.9 mln worth of Indian bonds on Apr. 23