The Indian rupee is expected to open largely unchanged on Wednesday, focussing on the expiry of monthly currency futures and the upcoming inclusion of Indian bonds in the JPMorgan emerging market debt index.
Non-deliverable forwards indicate the rupee will open nearly flat to the U.S. dollar from 83.4325 in the previous session.
The expiry of the NSE June USD/INR monthly futures at 12.30 p.m. IST may potentially prompt choppy price action in the rupee, dealers said.
The Reserve Bank of India (RBI), in its bid to support the rupee, had sold June USD/INR currency futures, which it later likely rolled over to July.
In lieu of the intervention, banks had done arbitrage by buying the June currency futures and selling them in the over the counter (OTC) market. The sold positions in the OTC market will need to be squared off at the RBI’s daily fixing rate.
The June currency futures are settled at the daily fixing rate.
“Due to this, there was a lot of action yesterday for today’s fixing,” a currency trader at a bank said. The Wednesday fix was dealt at a premium of 0.30 paisa, he said, indicating demand for buying dollars at the fix rate.
Meanwhile, the rupee is expected to be supported all through this week amid expectations of dollar inflows from India’s inclusion into the JPMorgan emerging market debt index on June 28.
“While you can’t be sure of quantum and the timing of the flows, it makes senses from the risk reward point of view to be short (on dollar/rupee) right now,” the currency trader said.
