The Indian rupee is expected to decline at open on Tuesday with U.S. Treasury yields pushing higher amid focus on the testimony from Federal Reserve Chair Jerome Powell and the U.S. non-farm jobs report due later in the week.
Non-deliverable forwards indicate rupee will open at 82.92 to the U.S. dollar compared with 82.8950 in the previous session. The domestic currency has been in a narrow 18 paisa range of 82.84-83.02 over two weeks.
With the Reserve Bank of India “resolutely defending the lower side of the range (on USD/INR)” and “not many takers for a push higher”, an FX trader at a bank said.
While the RBI has likely been buying the dollar when the dollar/rupee pair drops to near 82.85, there has been interest from oil companies and other importers too, according to traders.
The two-year U.S. Treasury yield rose 7 basis points on Monday and the 10-year was up 4 bps. There were no major U.S. data releases on Monday and analysts did not assign a particular reason for the move higher in yields.
The dollar index dipped on Monday and U.S. equities retreated slightly. Asian currencies were trading lower on Tuesday.
It is an important week for investors looking to gauge where U.S. interest rates are headed. Fed Chair Jerome Powell will testify to lawmakers on Wednesday and Thursday and then the U.S. jobs report is due on Friday.
Powell’s testimony will “get a look-in from traders and we know if he wants to move market pricing (on rate cuts) he can”, Chris Weston, head of research at Melbourne-based Pepperstone said in a note.
Meanwhile, Atlanta Fed President Raphael Bostic said on Monday that the U.S. central bank is under no urgent pressure to cut interest rates given a “prospering” economy and job market, repeating a message that has been touted by policymakers.
