Rupee to open flat; volatility tipped to rise later in Jan

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The rupee is expected at around 82.70-82.75 per dollar at the opening, compared to 82.72 in the previous session. It fell 11.2% last year.

The currency has traded in a narrow range in the last three weeks of 2022 and traders consider that volatility is likely to increase later this month.

These types of rangebound moves don’t last long and when the breakout happens, it can be quite sizeable, said a trader at a Mumbai-based bank.

We anticipate increased volatility later this month on new positions and flows and ahead of India’s budget, the dealer said. India’s union budget will be presented on February 1.

At the opening, the rupee will have to face the 3% jump in Brent crude futures on Friday.

Oil prices were born wild in 2022, climbing on tight supplies amid the war in Ukraine initially, then sliding on weaker demand from top importer China and concerns of an economic contraction.

The dollar index was little changed, around 103.5, to start the week. While the index rose 8% in 2022, it finished well off its highs of more than 114 on expectations of a less hawkish stance than the US Federal Reserve’s stance.

Data this week will help traders reassess the Fed’s interest rate outlook. US ISM manufacturing data is due on Wednesday, followed by the important services and jobs print on Friday.

Futures are currently pricing in a Fed rate peak of around 5% and will be followed by a rate cut later this year.

For USD/INR, the 83.00 to 83.20 zone is considered a near-term peak and any rise in spot prices is a good selling opportunity for exporters, said Amit Pabari, managing director of CR Forex.

KEY INDICATORS:

** One-month non-forward rupee at 82.88; one month land advance premium of 13.75 paise

** January USD/INR NSE futures settled at 82.84 on Friday

** USD/INR January forward premium at 12.5 paise

** Dollar index at 103.48

** Brent crude futures on Friday settled at just under $86

** The ten-year US note yield was 3.88%.

** Next-month SGX Nifty futures were down 0.3% at 18,174

** According to NSDL data, foreign investors bought a net worth of $56.6 mln of Indian shares on December 29

** NSDL data shows foreign investors sold a net worth of $51.99 million worth of Indian bonds on December 29

(Reporting by Nimesh Vora; Editing by Savio D’Souza)

By Nimesh Vora

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