MUMBAI: The Indian rupee looked set for a muted opening on Monday, with traders scanning headlines around the Kashmir attack and the movement in local equities for direction.
The 1-month non-deliverable forward indicated that the rupee will open flat-to-slightly higher from its previous close of 85.45.
The local unit saw sharp two-way moves on Friday, whipsawing between 85.08 and 85.66.
After an initial rally toward the 85 level, the currency reversed course, pressured by a selloff in local equities and bonds on fears that tensions between New Delhi and Islamabad could spiral after the militant attack in Kashmir.
The Nifty 50 dropped nearly 1% on Friday and the 10-year bond yield rose 4 basis points.
“Kashmir will be the focal point this week. The key question now is the extent of India’s response,“ a currency trader at a bank said.
The lack of major news over the weekend may offer the rupee slight relief at the open, he said.
Kashmir is claimed in full by both India and Pakistan, who each rule over parts of it, and have previously fought wars over the Himalayan region.
Meanwhile, most Asian currencies dipped on Monday, while the dollar index was little changed at 99.70. The near-term direction of the dollar will likely hinge on any headlines related to tariffs, according to analysts.
Beyond tariffs, traders will focus on a slew of key U.S. data releases this week to assess the impact of uncertainty stemming from President Donald Trump's trade policies.
The U.S. ISM manufacturing data is due Thursday, followed by the April jobs report on Friday. March core PCE data is scheduled for release on Wednesday
Incoming U.S. economic data “clearly matters,“ said Chris Weston, head of research at Melbourne-based broker Pepperstone, citing the growing divergence among market participants over the near-term outlook for U.S. equities, dollar, and Treasuries.
