Rupee likely to fall, short dollar positions may exit at open
By Nimesh Vora
MUMBAI, March 29 (Reuters) -The Indian rupee is expected to open lower compared with the U.S. currency on Wednesday, weighed down by likely position adjustments, traders said.
The non-deliverable forwards indicate the rupee INR=IN will open at 82.25-82.28, compared with 82.1875 in the previous session.
The spot date for USD/INR is now April 3, compared with March 31 as of Tuesday. The date shift to the new fiscal year has increased the carry cost for holding long dollar positions or the returns for holding short dollar positions overnight.
"We suspect that at the open, traders who took positions for the carry will rush for cover," a trader at a Mumbai-based bank said. "It will not surprise us if we see an uptick (on USD/INR) immediately."
Asian currencies were mostly rangebound on the day and the dollar index =USD was little changed at about 102.50. The abatement of acute fears around the U.S. banking sector has impacted demand for the safe haven dollar.
An agreement to buy all of failed U.S. lender Silicon Valley Bank's deposits and loans alongside steps taken by financial regulators have alleviated fears around U.S. banks.
Further Michael Barr, the Federal Reserve's vice chairman for supervision, said SVB's problems were due to "terrible" risk management, suggesting the lender's collapse could be an isolated issue. nL1N3601DT
DBS Research noted that pricing of the Fed's policy path "has swung from one extreme to another" amid the developments around the SVB.
Futures are now pricing in about 50 basis points of rate cuts this year and a Fed rate of 4.35% by December FEDWATCH, compared with sub-4% at the peak of the crisis.
The 2-year Treasury yield is now above 4%, about 50 basis points off its recent lows.
KEY INDICATORS:
** One-month non-deliverable rupee INRNDFOR= forward at 82.42; onshore one-month forward premium at 15 paisa
** USD/INR NSE April futures settled on Tue at 82.3225
** USD/INR April forward premium at 15.0 paisa
** Dollar index =USD little changed at 102.50
** Brent crude futures LCOc1 up 0.4% at $79 per barrel
** Ten-year U.S. note yield rises to 3.58%
** SGX Nifty SINc1 nearest-month futures up 0.1% at 17,000
** As per NSDL data, foreign investors sold a net $75.6 million worth of Indian shares on Mar. 27
** NSDL data shows foreign investors bought a net $28.6 million worth of Indian bonds on Mar. 27
Reporting by Nimesh Vora; Editing by Savio D'Souza
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