Indian rupee may open tad lower after dollar index hits 2-decade high above 110

·2-min read
A customer hands Indian currency notes to an attendant at a fuel station in Mumbai

By Nimesh Vora

MUMBAI (Reuters) - The Indian rupee may open slightly weaker against the U.S. currency on Monday after the dollar index scaled a fresh two-decade high.

The rupee is likely to open at 79.84-79.86 per U.S. dollar, compared with the previous session's close of 79.7950. The local currency last week traded in a range of 79.30-80.12 amid central bank interventions and broad dollar strength.

Last week's range is "our new support and resistance levels" for the USD/INR pair, a trader at a Mumbai-based bank said. It will be "quite a task to take out the 80 level", he said, adding that the psychological level "will continue to attract" speculators and exporters.

The dollar index climbed to 110.02, boosted by a decline in the euro after Russia's indefinite closure of its main gas supply pipeline to Europe stoked fears of energy shortages and a hit to growth.

Russia scrapped a Saturday deadline for flows down the Nord Stream pipeline to resume, citing an oil leak in a turbine. It coincided with the Group of Seven finance ministers announcing a price cap on Russian oil.

Tracking the dollar index, Asian currencies declined. The offshore Chinese yuan dropped to 6.9378 to the dollar, while the Korean won dropped 0.6%.

On Friday, the dollar index had declined below 108.30 in intraday trading following a U.S. jobs report that prompted traders to reduce the odds of a 75-basis-point Federal Reserve rate hike this month.

Headline jobs additions were in line with expectations but overshadowed by an uptick in the unemployment rate and a slower-than-expected increase in average hourly earnings.

The dollar recovered to close almost flat on Friday after U.S. equities reversed early gains. The S&P 500 Index finished 1% lower after climbing 1.3% earlier on Friday.

U.S. equity futures were flat, while Asian shares were mixed on Monday.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 80.11; onshore one-month forward premium at 20.06 paise ** USD/INR NSE September futures closed on Friday at 80.0375 ** USD/INR forward premium as of Sept. 2 for end current month is 16.0 paise ** Dollar index down at 110.01 ** Brent crude futures up 1.5% at $94.5 per barrel ** Ten-year U.S. note yield at 3.2%, India 10-yr bond yield at 7.23% ** SGX Nifty nearest-month futures down 0.1% at 17,516 ** As per NSDL data, foreign investors sold a net $289.3 mln worth of Indian shares on Sept. 1

** NSDL data shows foreign investors bought a net $16.1 mln worth of Indian bonds on Sept. 1

(Reporting by Nimesh Vora; Editing by Subhranshu Sahu)