Rupee to hang around 82/$ on soft dollar, RBI intervention bets

MUMBAI, July 18 (Reuters) - The Indian rupee is expected to open little changed on Tuesday amid a mostly weaker dollar and expectations that the Reserve Bank of India may step in.

Non-deliverable forwards indicate the rupee will open barely changed from 82.04 in the previous session.

With the RBI “at least on the face of it” capping the downside (on USD/INR) at 81.80-81.85 and the dollar struggling overall, expect a range of 20 paisa on either side of 82, a foreign exchange trader said.

The USD/INR implied volatility will remain “depressed”, the trader added.

Over the last two weeks, the RBI has been regularly buying dollars via pubic sector banks when the rupee strengthened to the 81.80-81.90 level, according to market participants. The rupee, on a number of occasions this month, has not been able to sustain a move above 82.

The dollar index was hovering not too far from an over one-year low on bets that the U.S. Federal Reserve is nearing the end to its rate-hiking cycle. The Fed is expected to raise rates one last time next week, followed by a long pause.

U.S. retail sales and industrial output data is due Tuesday.

The data “will provide the committee with fresh insight on demand and output for the cyclically sensitive goods and manufacturing sectors\”, ANZ said in a note.

Asian currencies were higher during the day, while equities were mostly lower despite the positive session for their U.S. peers.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 82.10; onshore one-month forward premium at 8.25 paisa

** USD/INR NSE July futures settled on Monday at 82.0875

** USD/INR July forward premium at 3.25 paisa

** Dollar index down at 99.82

** Brent crude futures up 0.1% at $78.6 per barrel

** Ten-year U.S. note yield at 3.8%

** As per NSDL data, foreign investors bought a net $399.4mln worth of Indian shares on July 14

** Foreign investors bought a net $5mln worth of Indian bonds on July 14, data shows