All-time low looms for rupee on risk aversion; RBI watched
By Nimesh Vora
MUMBAI, July 25 (Reuters) -The Indian rupee is expected to decline to a lifetime low at open on Thursday on weak risk appetite and a drop in Asian peers.
Non-deliverable forwards indicate the rupee INR=IN will open at 83.74-83.75 to the U.S. dollar, slipping past the previous all-time low of 83.72 and compared with 83.7175 on Wednesday.
It would be the fourth day in a row that the local currency has hit a low. The Reserve Bank of India has intervened regularly to support the rupee, capping its decline.
The rupee is down just 0.2% this week.
"While we keep making fresh highs (on dollar/rupee), there is no way you can think of a breakout," a currency trader at a banks. "The RBI is doing what it does, and managing the extent of price moves."
The rupee has had to contend with the increase in the tax rate on profit from equity investments, which has impacted foreign investor flows. In the last two sessions, overseas investors have taken out nearly $800 million from equities. Prior to that, these investors had poured in $5 billion in July.
ASIA FX STRUGGLES
Asian currencies and equities were down, weighed by the overnight selloff on Wall Street. The S&P 500 Index suffered its worst day in one-and-half years. The technology dominated Nasdaq Composite fared worst.
The risk-off mood in markets has continued amid US election uncertainty, technology earnings disappointment, and signs of softness in world growth, MUFG Bank said in a note.
The risk aversion prompted a rally on the Japanese yen. U.S. Treasury yields dipped in Asia after inching up on Wednesday.
KEY INDICATORS: ** One-month non-deliverable rupee INRNDFOR= forward at 83.82; onshore one-month forward premium at 7 paise ** Dollar index =USD down at 104.26 ** Brent crude futures LCOc1 down 0.8% at $81.1 per barrel ** Ten-year U.S. note yield at 4.26% ** As per NSDL data, foreign investors sold a net $185.1mln worth of Indian shares on Jul. 23
** NSDL data shows foreign investors bought a net $294.6mln worth of Indian bonds on Jul. 23
Reporting by Nimesh Vora
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