Rupee seen flat near 82/USD; U.S. yields, importers hedging in focus

 The Indian rupee is likely to open little changed to the U.S. currency on Tuesday, with traders assessing the outlook for U.S. yields and keeping a watch on importers' demand for the greenback.

The non-deliverable forwards indicate the rupee will open at around 81.98. That is the same as the close on Monday when the currency reached an intraday high of 81.78 before easing due to, what traders said was, demand from oil marketing companies.

"Yesterday's session was a reminder that below 82, there is good demand for dollars, mostly from corporates," said a trader at a private sector bank. At the 82 level, it's "natural there will be interest on either side".

The rupee's near-term direction, he said, will be dictated by the effect of U.S. inflation data, due on Wednesday, on Treasury yields and dollar portfolio flows.

This is the last inflation print before the Federal Reserve next meets, on May 2-3, and will play a pivotal role in its decision on whether to hike interest rates.

"Another 0.4% month-on-month figure on core CPI (consumer price index) – more than double the rate required over time to take the U.S. back to the 2% year-on-year inflation rate target – could nudge expectations for the upcoming Fed meeting higher," ING Bank said in a note.

The 2-year U.S. yield is hovering just shy of the 4% level.

The odds of a Fed rate hike have increased after the U.S. jobs data on Friday. Futures are now pricing in a near 70% chance of a 25 basis points hike.

Further, investors are pricing in rate cuts from July onwards, contrary to U.S. policymakers' indications.

Fed New York President John Williams said market expectations are not a notable issue for him right now.


** One-month non-deliverable rupee forward at 82.08; onshore one-month forward premium at 13 paisa

** USD/INR NSE April futures settled on Monday at 82.0650

** USD/INR April forward premium at 6.5 paisa

** Dollar index inches lower to 102.36

** Brent crude futures up 0.6% at $84.6 per barrel

** Ten-year U.S. note yield at 3.4%

** SGX Nifty nearest-month futures up 0.2% at 17,724

** As per NSDL data, foreign investors bought a net $55.4 mln worth of Indian shares on April 7

** NSDL data shows foreign investors bought a net $37.7 mln worth of Indian bonds on April 7