The Indian rupee is poised to open higher versus the U.S. currency, tracking the dollar‘s broad losses on receding fears about the U.S. banking sector.
The non-deliverable forwards indicate the rupee will open at around 82.18-82.20 to the U.S. dollar compared with 82.37 in the previous session.
The support level for the USD/INR “is pretty straightforward,” lying around 82.00-82.10, a trader at a Mumbai-based bank said. Last week’s low for USD/INR was 82.07, a level at which it ran into a “string of” dollar buying, he pointed out.
“Highly doubt 82-82.10 is at risk of being taken out today.”
Asian currencies were up 0.2% to 0.6% while the dollar index declined to 102.60. A deal to buy the assets of Silicon Valley Bank (SVB) allayed concerns about the U.S. banking sector to an extent, undermining demand for the safe-haven dollar.
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The S&P 500 Index inched up overnight and near-maturity Treasury yields jumped. A report over the weekend that U.S. authorities are considering the expansion of an emergency lending facility that would offer banks more support has helped risk.
Lower risk aversion prompted investors to reconsider expectations regarding the U.S. Federal Reserve’s rate path. The odds now are almost 50-50 on whether the Fed will hike rates by 25 basis points at the May meeting or opt for a pause.
Futures are pricing in a Fed rate of around 4.20% by December this year. This had dropped below 4% at the peak of the U.S. banking turmoil.
The markets’ assessment of risk in the U.S. and Europe banking sectors will drive much of the swings in currencies this week, ING Bank said in a note.
Meanwhile, oil prices jumped overnight, a negative for the rupee. Oil prices rose more than USD 3 on Monday, with a halt to some exports from Iraq’s Kurdistan region adding to worries about oil supplies.
