Rupee rises 10 paise to 81.22 against soft dollar near 5-month low

The rupee rose in early trade on Monday as the dollar failed to gain any traction and fell to a five-month low after traders ignored a stronger-than-expected US jobs report, and China’s Rising optimism about reopening boosted risk sentiment.

According to Bloomberg, the rupee was last trading at 81.2162 on Friday against its previous closing price of 81.3163.

In the near term, appreciation factors for the rupee could be weakness in USD/yield, fall in oil prices, appreciation in equivalent currencies like Yuan/Yen, FII inflows and stable domestic outlook,” said Amit Pabri, Managing Director CR Forex advisors.

Investors will also be watching the decision of the Reserve Bank of India’s three-day policy meeting, which is to be announced on Wednesday.

As long as inflation is still a concern, the central bank could reduce interest rates by 35 basis points to 6.25 percent, according to experts polled by Reuters. RBI has increased rates by 50 bps in the last three times.

The “balance of probabilities” is that the rupee “will not do much” after the opening, based on Asian cues, a trader at a Mumbai-based bank told Reuters.

The trader said the rupee was struggling to move above 81 last week despite positive signs, so there is no reason to think it will be any different today.

The dollar index, which compares the greenback’s value to six major currencies – including the yen and the euro – fell to its lowest level since June 28. The index declined 1.4 percent last week.

“We look forward to US payrolls with only a momentary jolt to riskier markets,” Chris Weston, head of research at Pepperstone, told Reuters. A hike of 50 basis points next week is still the default position.

“With limited data and no Fed speaker to drive this week, the market could start to think for itself and could see massive exposure before next week,” Weston said.

As authorities ramped up the process of reopening the economy, Chinese stocks rose and the yuan surpassed the widely seen 7-per-dollar mark for the first time since September.

“There are more signs of an easing of Covid restrictions, and positive factors have not been fully priced in by the market,” Kenny Wen, head of investment strategy at KGI Asia in Hong Kong, told Bloomberg. “I expect more funds to continue holding long positions through the rest of the month for window dressing purposes towards the end of the year.”

Other Asian currencies followed the yuan higher.