The Indian rupee is expected to drop at the opening on Monday, tracking losses in Asian peers and on persisting worries over U.S. yields.
Non-deliverable forwards indicate rupee will open at around 83.18-83.20 to the U.S. dollar, compared with 83.1025 in the previous session.
Despite the RBI’s efforts, it “does feel inevitable” that the rupee will hit a new lifetime low, “probably in a matter of days,” a forex trader at a Mumbai-based bank said.
The fact that rupee is on the weaker side of 83 despite the RBI’s intervention and “what is happening on the yuan and U.S. yields” suggest more losses for the currency, the trader said.
The offshore Chinese yuan dropped to near 7.32 to the dollar on Monday despite a smaller-than-expected interest rate cut. China cut its one-year benchmark lending rate on Monday by 10 basis points, compared to a 15 bps reduction expected by majority of economists polled by Reuters.
The five-year lending rate was left unchanged. More than 90% of the economists had predicted a 15 bps rate cut.
Meanwhile, the 10-year U.S. yield was up on Monday. Growing expectations that the Federal Reserve will keep interest rates higher for longer has prompted a more than 30 bps jump on the 10-year.
Focus this week will be on Fed’s Jackson Hole Economic Symposium. Investors expect Chair Jerome Powell to give clarity on the interest rate path.
“Chair Powell may reiterate that policy is data dependent, and that policy will remain restrictive for some time,” ANZ said in a note.