Rupee May Track Asian Peers Higher; U.S. Yields, Oil Prices In Focus

The Indian rupee is tipped to open higher versus the dollar on Wednesday, boosted by strength in most Asian peers and upbeat risk appetite.

The rupee is seen opening at 82.25-82.30 per U.S. dollar. On Tuesday, the rupee finished at 82.36, a level almost flat to the dollar, after attempting to strengthen above 82-mark at one point.

"The session yesterday (Tuesday) was one more indication that the bias on the rupee is on the downside," a trader at a Mumbai-based bank said.

For a "sustainable and decent recovery" in the rupee, there will "need to be reasonable certainty" that U.S. yields had topped out, the trader said.

Some bankers Reuters spoke to said the rupee's decline from the 82-level was due to dollar demand from oil companies and other importers, while two others said it was likely due to the Reserve Bank of India (RBI) buying USD/INR futures ahead of Friday's expiry.

The latter is in contradiction to the RBI's intent to manage depreciation pressures on the rupee and was likely done to avoid the volatility on the expiry day, traders said. October futures contracts on the currency expire next Friday.

Meanwhile, Asian currencies were trading mostly higher, while the dollar index inched lower to near 112. The upbeat risk mood kept a lid on demand for the dollar.

U.S. equity futures indicated that the S&P 500 index was likely to add to its recent recovery. Robust U.S. factory output data lifted risk assets in the country, while the 10-year Treasury yields was back above 4%.

Meanwhile, oil prices rose in Asia trading after slipping on Tuesday on fears of higher U.S. supply combined with an economic slowdown and lower Chinese fuel demand.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 82.51; onshore one-month forward premium at 22 paise

** USD/INR NSE October futures settled at 82.45 on Tuesday

** USD/INR October forward premium at 6.5 paise

** Dollar index at 112.01

** Brent crude futures at $90.8 per barrel

** Ten-year U.S. note yield at 4.03%

** SGX Nifty nearest-month futures up 0.2% at 17,527

** As per NSDL data, foreign investors sold a net $22.3mln worth of Indian shares on Oct. 18

** NSDL data shows foreign investors bought a net $81.8mln worth of Indian bonds on Oct. 18