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Rupee seen higher on current account deficit surprise, dollar retreat

09/29/2022 | 11:04pm EST
An attendant at a fuel station arranges Indian rupee notes in Kolkata

MUMBAI (Reuters) - The Indian rupee is expected to open higher against the U.S. dollar on Friday, after the country reported a lower-than-expected current account deficit for the June quarter.

The dollar index pulling back further from multi-year highs will likely be an additional boost for the rupee, traders said.

The rupee is likely to open around 81.65-81.70 per dollar, up from 81.86 in the previous session.

India posted a CAD of $23.9 billion in the April-June period, wider than $13.4 billion in the preceding quarter but lower than $30.5 billion that economists were expecting.

In terms of percentage of the GDP, the CAD widened to 2.8%, the highest in four years. A Reuters poll of 18 economists were expecting CAD of 3.6% of the GDP.

"A slightly larger services surplus, and remittances, ensured the deficit did not widen dramatically," said Rahul Bajoria, chief India economist at Barclays Bank.

Bajoria expects the CAD to remain elevated in the coming quarters, thanks to the revival in domestic demand and the ongoing impact of elevated commodity prices.

Traders await the Reserve Bank of India's policy decision at 1000 IST (0430 GMT). The surging Treasury yields and the resultant pressure on the rupee is likely to prompt the RBI reason to deliver a 50-basis-point rate hike.

"In the context how quickly the rupee has fallen over the last few days, we think it is almost certain the RBI will deliver a 50 basis point hike and a hawkish commentary," a trader at a Mumbai-based bank said.

FTSE Russel said India will be retained on its watch list for a potential upgrade to Market Accessibility Level '1' and for consideration for inclusion in the FTSE Emerging Markets Government Bond Index (EMGBI).

"FTSE Russell outcome reduces the likelihood that India would be added to GBI-EM, as it suggests that there have not been sufficient progress on overcoming operational hurdles," DBS said in a note.

The dollar index dropped about 1% on Thursday to near 112, pulling back away from the two-decade high of 114.78. A rally in the British pound to above 1.10 to the dollar pulled down the gauge.

KEY INDICATORS:** One-month non-deliverable rupee forward at 81.82; onshore one-month forward premium at 26 paise

** USD/INR NSE October futures closed at 82.0175 on Thursday

** USD/INR forward premium for end October is 24 paise

** Dollar index at 112.12

** Brent crude futures down 0.3% at $88.2 per barrel

** Ten-year U.S. note yield at 3.79%

** SGX Nifty nearest-month futures down 0.6% at 16,715

** As per NSDL data, foreign investors sold a net $255.9 million worth of Indian shares on Sept. 28

** NSDL data shows foreign investors sold a net $45.8 million worth of Indian bonds on Sept. 28

(Reporting by Nimesh Vora; Editing by Rashmi Aich)

By Nimesh Vora

ę Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) -0.27% 0.55462 Delayed Quote.4.01%
AUSTRALIAN DOLLAR / INDIAN RUPEE (AUD/INR) -0.38% 54.746968 Delayed Quote.1.96%
BARCLAYS PLC 0.51% 159.86 Delayed Quote.-14.94%
BRENT OIL -2.93% 80.98 Delayed Quote.9.14%
BRITISH POUND / US DOLLAR (GBP/USD) 0.25% 1.20882 Delayed Quote.-10.61%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) -0.44% 0.615938 Delayed Quote.5.66%
CANADIAN DOLLAR / INDIAN RUPEE (CAD/INR) -0.49% 60.747 Delayed Quote.3.65%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.19% 0.74413 Delayed Quote.-5.53%
DOW JONES FXCM DOLLAR INDEX -0.20% 12981.01 Real-time Quote.6.93%
EURO (B) VS INDIAN RUPEE SPOT (EUR/INR) 0.92% 85.5239 Delayed Quote.0.18%
EURO / BRITISH POUND (EUR/GBP) 0.79% 0.86716 Delayed Quote.2.31%
EURO / US DOLLAR (EUR/USD) 1.02% 1.04837 Delayed Quote.-8.57%
INDIAN RUPEE / BRITISH POUND (INR/GBP) 0.16% 0.010139 Delayed Quote.2.01%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.06% 0.012249 Delayed Quote.-8.84%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.22% 0.62299 Delayed Quote.-8.65%
S&P GSCI BRENT CRUDE INDEX -2.84% 691.0646 Real-time Quote.9.46%
US DOLLAR / BRITISH POUND (USD/GBP) -0.26% 0.827575 Delayed Quote.11.87%
US DOLLAR / INDIAN RUPEE (USD/INR) -0.06% 81.64 Delayed Quote.9.70%
WTI -2.97% 73.864 Delayed Quote.3.43%
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