INDIAN RUPEE Rupee set to open little change as US yields jump, dollar stagnates

MUMBAI, Dec 28 (Reuters) – The Indian rupee was expected to open little change against the U.S. currency on Wednesday amid surging U.S. yields and a flat dollar.

The Rupee is seen around 82.75-82.80 per dollar in early trades from its previous close of 82.8475.

The currency could even gain slightly at the open, following a subdued dollar, in the absence of new clues, with China’s moves towards reopening a positive in the background, a forex trader said.

However, a slight rise in US yields could put some pressure, the broker added, while citing limited trading activity over the holidays.

The dollar index held steady at 104.250 after China announced on Monday it would scrap its COVID-19 quarantine rule for inbound travelers even as COVID cases surge.

Rising cases are a risk, but economic reopening is ultimately necessary and could boost activity in China, said Sajal Gupta, head of forex and rates at Edelweiss Financial Securities.

Asian stocks gave up gains on Tuesday, following a tumble in U.S. stocks as investors were divided over China’s policy shift, while most Asian currencies fell.

Oil prices held firm at around $84.40 in another threat to the rupee.

After a holiday, benchmark US Treasury yields rose more than 10 basis points overnight to near a five-week high of 3.86% as investors continued to assess the trajectory of the Federal Reserve for interest rates.

After a nearly three-month low, the 10-year yield has steadily risen as policy announcements from global central banks drove strong gains until last week.

KEY INDICATORS:

** One-month forward non-deliverable rupee at 82.94; 1 month onshore term premium at 15 paise

**USD/INR NSE Dec futures settled Tuesday at 82.8575

** The USD/INR futures premium in December as of December 27 for the end of the current month is 0.3 paise

** Dollar index at 104.24

** Brent futures at $84.4 per barrel

** US ten-year note yield at 3.84%

** Nearest month SGX Nifty futures down 0.5% to 18,065

** According to NSDL data, foreign investors bought $28.6 million net worth of Indian stocks on December 26.

** NSDL data shows foreign investors bought $65.7 million net worth of Indian bonds on December 26

Reporting by Anushka Trivedi; Editing by Savio D’Souza

Our standards: The Thomson Reuters Trust Principles.

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