Indian rupee likely to open flat as oil surge counters dollar retreat

Indian rupee likely to open flat as oil surge counters dollar retreat

By Nimesh Vora

MUMBAI, Aug 24 (Reuters) - The Indian rupee is tipped to open little changed against the dollar on Wednesday, as an overnight jump in oil prices offset support from a slight pullback in the U.S. currency.

The rupee INR=IN is seen at around 79.84-79.88, compared with the previous session's close of 79.8625. It traded in a range of about 20 paisa in the last three sessions.

It will likely be another session where the rupee "will lack direction", a trader with a Mumbai-based bank said.

Meanwhile, importers are increasing hedges on concerns that the rupee may add to its near 7.5% decline so far in 2022.

Brent crude futures LCOc1 climbed almost 4% on Tuesday to near $100 a barrel after Saudi Arabia floated the idea of OPEC+ output cuts to support prices.

The dollar index =USD at one point on Tuesday dropped to 108.06 after data indicated weak U.S. private sector activity. The S&P Global flash composite purchasing managers index (PMI) for August dropped to the lowest since May 2020.

The data fuelled concerns about the U.S. economic outlook and whether slowdown worries could prompt the Federal Reserve to slow its pace of rate hikes.

Still, Fed Fund futures indicate a near 55% chance that the U.S. central bank will raise rates by 75 basis points next month, according to the CME FedWatch Tool.

Treasury yields reached multi-week highs, despite the disappointing data. Traders are awaiting Fed Chair Jerome Powell's comments at the central bank symposium in Jackson Hole, Wyoming on Friday.

The dollar index managed to recover from its intraday low on Tuesday, helped by risk aversion. The S&P 500 Index declined for the third straight day and futures indicated more losses for the benchmark gauge.

Asian currencies and shares were mixed on Wednesday and the SGX Nifty indicated a slightly weaker opening for Indian equities. Traders will parse through daily equity flows data to see whether a recent deterioration in risk appetite impacted flows.

KEY INDICATORS: ** One-month non-deliverable rupee INRNDFOR= forward at 80.08; onshore one-month forward premium at 21.50 paise ** USD/INR NSE August futures closed on Tuesday at 79.91 ** USD/INR forward premium INR1FC= as of Aug. 23 for end current month is 2.5 paise ** Dollar index =USD at 108.68 ** Brent crude futures LCOc1 down 0.4% at $99.8 per barrel after climbing almost 4% on Tuesday ** Ten-year U.S. note yield at 3.04%, India 10-yr bond IN065432G=CC yield at 7.28% ** SGX Nifty SINc1 nearest-month futures down 0.4% at 17,533 ** As per NSDL data, foreign investors sold a net $43.4 mln worth of Indian shares on Aug. 23

** NSDL data shows foreign investors bought a net $9.8 mln worth of Indian bonds on Aug. 23


Reporting by Nimesh Vora; Editing by Subhranshu Sahu