Rupee seen below 82 on hawkish Fed remarks, dollar outflows

By Anushka Trivedi and Nimesh Vora

MUMBAI, Oct 7 (Reuters) - The Indian rupee was expected to fall below 82 per dollar and hit a record low on Friday, after a chorus of Federal Reserve officials reiterated the need for higher interest rates ahead of the crucial U.S. jobs report.

The rupee INR=IN is tipped to open at 82.15-82.20 per U.S. dollar, down from 81.88 in the previous session.

It is "almost certain" that the rupee will open below 82 in light of the "huge dollar demand" witnessed after normal OTC trading hours on Thursday, a trader at a private sector bank said.

The rupee on the interbank trading system fell to a low of 82.28 on Thursday. USD/INR October futures, which trade beyond OTC hours, settled at 82.39, climbing almost 35 paise in the last one-and-a-half hours.

The rupee's slump after 1530 local time was fuelled by traders who were caught short on the USD/INR amid strong corporate dollar demand.

Traders who Reuters enquired with said there was defence payment-related dollar outflows on Thursday. One trader said there was an outflow of $300 million pertaining to a public sector undertaking.

In opening deals on Friday, the rupee will track the broad uptick in the dollar after Fed officials once again adopted a hawkish tone. A slew of Fed officials reinforced the view that the central bank is nowhere near done with its hiking cycle as it seeks to bring down inflation, and that rates are expected to go up further.

Treasury yields rose and the dollar advanced against a basket of its major peers, while U.S. equities slipped overnight. The 2-year Treasury yield climbed to 4.27%, less than 10 basis points away from recent highs.

Asian currencies were down 0.2% to 0.5%. The offshore Chinese yuan declined to 7.10 to the dollar.

The focus now shifts to the monthly U.S. jobs data due later in the day. The data will help traders assesses how the labour market is holding up to the rate hikes that the Fed has delivered so far and gauge the pace of future monetary policy tightening.

Meanwhile, the rupee was likely to trade near its record low against the dollar beyond this year, buffeted by rising oil prices and an aggressive Fed, a Reuters poll found.

KEY INDICATORS: ** One-month non-deliverable rupee INRNDFOR= forward at 82.50; onshore one-month forward premium at 24 paise ** USD/INR NSE Oct futures closed on Thursday at 82.33 ** USD/INR forward premium INR1FC= for current month is 13.5 paise ** Dollar index =USD at 112.18 ** Brent crude futures LCOc1 down 0.2% at $94.3 per barrel ** Ten-year U.S. note yield at 3.82%, India 10-yr bond yield at 7.48% ** SGX Nifty SINc1 nearest-month futures down 0.2% at 17,276 ** As per NSDL data, foreign investors bought a net $237.8 mln worth of Indian shares on Oct. 4

** NSDL data shows foreign investors sold a net $47.3 mln worth of Indian bonds on Oct. 4
Reporting by Nimesh Vora; Editing by Subhranshu Sahu

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