Rupee hopeful of recovery on back of uptick on Asia FX

The Indian rupee will be looking to recover on Monday, tracking the move higher in Asian peers on better-than-expected China data.

Non-deliverable forwards indicate the rupee will inch up to the U.S. dollar at open from 82.2475 in the previous session. The domestic currency on Friday had its worst session in just under two months.

With Asian currencies doing well to begin the week and risk holding up, the rupee "will be hoping for a mini recovery", a forex trader at a bank said.

Kunal Kurani, associate vice president at Mecklai Financial, expects the USD/INR in a range of 81.80-82.30 this week, with moves in the Chinese yuan and "high-impact" U.S. data considered to be the important variables.

U.S. ISM manufacturing and services data is due this week, alongside the private payrolls and non-farm payrolls readings. The data comes after Federal Reserve Chair Jerome Powell left the door open for a rate hike at the September meeting. Investors, however, are not convinced that another hike will be needed.

Data out on Friday supported investor expectations that the Fed rate hike cycle is over. The U.S. June quarter Employment Cost Index rose 1.0 per cent quarter-on-quarter compared with 1.2 per cent pace in the January-March period. The annual rate slowed to 4.5 per cent from 4.8 per cent.

The offshore yuan rose to 7.14 to the dollar, helped by the China PMI reading and another daily fix by the country's central bank that indicated support for the currency.

The People's Bank of China set the daily yuan mid-point at 7.1305 against 7.1524 estimated by Reuters.

Meanwhile, while China's manufacturing activity fell for a fourth straight month in July, the reading was slightly better than what economists had expected.

KEY INDICATORS:

One-month non-deliverable rupee forward at 82.28; onshore one-month forward premium at 7.5 paisa

USD/INR NSE August futures settled at 82.28 on Friday

USD/INR forward premium at 7.25 paisa

Dollar index at 101.75

Brent crude futures down 0.5 per cent at $84.6 per barrel

Ten-year U.S. note yield at 3.98 per cent ** As per NSDL data, foreign investors sold a net $152.4mln worth of Indian shares on Jul. 27

NSDL data shows foreign investors bought a net $31.6mln worth of Indian bonds on Jul. 27