By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee is expected to open largely unchanged on Friday, caught between expectations of the Reserve Bank of India stepping in to prevent further losses and the drag from persistent equity outflows and weak sentiment.
The 1-month non-deliverable forward indicated the rupee will open in the 87.60 to 87.64 range versus the U.S. dollar, compared with 87.6250 in the previous session.
The rupee has largely struggled this week, with brief attempts at recovery quickly fizzling out on concerns over the broader economic impact of the additional U.S. tariffs.
Despite that, the currency is down only 0.1% so far this week, with traders pointing to Reserve Bank of India’s intervention that has kept it from sliding to an all-time low.
Foreign outflows have accelerated over the past two sessions, with investors pulling out more than $1 billion from Indian equities weighing on the rupee. Local equities have dropped nearly 2% over that period.
“The bias (on the dollar/rupee) is higher, no question. However, with the RBI expected to sit heavy at 87.80-88, there’s no definitive trade,” a currency trader at a Mumbai-based bank said.
“All know what is the current line in the sand, so there is hesitation on how much room there is.”
ASIA FX WEAK
Asian currencies were mostly weaker on Friday, with the exception of the Chinese yuan. The dollar index was marginally higher.
The focus is now on the release of the U.S. PCE price index data – the Federal Reserve’s preferred measure of inflation – for clues on the rate outlook.
Traders are currently pricing in an 86% chance of a U.S. rate cut in September.
Fed Governor Christopher Waller on Thursday said he wants to start cutting interest rates next month and “fully expects” more rates cuts to follow to bring the Fed’s policy rate near to a neutral setting.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.74; onshore one-month forward premium at 11 paise
** Dollar index inches up to 97.98
** India June quarter GDP data due at 4:00 pm IST
** Brent crude futures down 0.8% at $68.1 per barrel
** Ten-year U.S. note yield at 4.21%
** As per NSDL data, foreign investors sold a net $644 mln worth of Indian shares on Aug. 26
** NSDL data shows foreign investors sold a net $24.5 mln worth of Indian bonds on Aug. 26
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
