Rupee To Edge Lower At Open, Bearish Tilt Persists On Weak Flows

The rupee is likely to open a tad lower and stay on the defensive on Tuesday, weighed down by weak portfolio flows and higher dollar demand in the non-deliverable forwards market, which traders reckon signals bearish positioning on the currency.

The 1-month NDF indicated the rupee will open in the 90.12-90.14 range versus the U.S. dollar, having settled at 90.07 on Monday.

The rupee is Asia's worst-performing major currency this year. Its downward bias was reinforced last week after it fell past the 90 per dollar mark and hit an all-time low of 90.42.

In recent sessions, traders have pointed to strong dollar bids in the NDF market that often indicate a pick-up in speculative activity.

"Offshore has been sticking to long positions (on USD/INR), while RBI doesn't seem to be very active," a trader at a Mumbai-based bank said, pointing to the rise in near-tenor NDF points.

The 1-month USD/INR NDF points were last at 25 paisa after hitting an over 8-month high of 29 paisa in the previous session.

Besides pressure from the NDF market, weakness in foreign portfolio flows also remains a sore spot for the rupee, with analysts saying a turnaround in foreign flows hinges on a breakthrough in U.S.-India trade talks.

Foreign investors have net sold $1.3 billion of local stocks so far in December.

U.S. Treasury Secretary Scott Bessent said on Tuesday that Washington is still working on a trade deal.

"We are hesitant to be too bearish (on rupee) at current levels given how much USD/INR has already spiked and any news around US-India trade deal could start to move the needle in terms of flow dynamics," MUFG said in a note.

Elsewhere, the dollar index was steady at 99, while most Asian currencies were a tad weaker. A powerful 7.5-magnitude earthquake in Japan added to the risk-averse mood heading into key central bank policy decisions this week.

KEY INDICATORS:

• One-month non-deliverable rupee forward at 90.40; onshore one-month forward premium at 27 paisa
• Dollar index at 99.01
• Brent crude futures down 0.1% at $62.5 per barrel
• Ten-year U.S. note yield at 4.16%
• As per NSDL data, foreign investors sold a net $1.8 million worth of Indian shares on December 5
• NSDL data shows foreign investors sold a net $28.2 million worth of Indian bonds on December 5