MUMBAI, Dec 7 (Reuters) – The Indian rupee is expected to open higher against the dollar on Wednesday after oil prices fell on concerns over the demand outlook.
The policy decision from the Reserve Bank of India (RBI) is expected shortly after the opening.
The Rupee is expected to open around 82.40-82.45 vs. 82.6150 in the previous session. The local unit will look to halt a 1.7% three-day decline that took it to its lowest level in a month.
Corporate dollar outflows and the elimination of long rupee positions were cited as reasons for the rupee’s plunge and intraday volatility picking up.
While falling oil prices will undeniably help, the positive open is “more a reflection” of markets wanting to gauge how sustainable the rupiah’s “unexpected” drop to well below 82 is, a analyst said. trader from a Mumbai-based bank.
The impact of the RBI’s policy decision is “pretty straightforward”, the trader said. A rise of 35 basis points (bp) is priced in and will have no impact, while a rise of 25 bp will be very negative for the rupiah in the current context.
According to a Reuters poll, the RBI is expected to offer a 35 basis point rate hike with inflation holding above the central bank’s tolerance band.
Oil prices fell overnight, with Brent futures slipping below $80. Concerns about how demand will evolve amid uncertainty over the global economic outlook drove Brent futures down almost 4%.
Asian currencies were mostly a little higher while the dollar index hovered around 105.50. Asian stocks suffered moderate losses while US stock futures were little changed.
KEY INDICATORS: ** 1-month forward non-deliverable rupee at 82.55; 1-month onshore futures premium at 11 paise ** USD/INR NSE December futures settled Tuesday at 82.5225 ** USD/INR December futures premium at 7.0 paise ** Dollar index at 105 .5 **Brent futures at $79.5 a barrel **U.S. ten-year yield at 3.54% **SGX Nifty futures nearest month down 0.1% at 18 742 ** According to NSDL data, foreign investors sold $109.6 million net of Indian stocks on December 5 ** NSDL data shows foreign investors bought $18.2 million net of bonds indians on december 5th
Reporting by Nimesh Vora; Editing by Janane Venkatraman
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