Rupee eyes dip in US yields, uptick on Asian peers

MUMBAI (Reuters) - The Indian rupee is set to benefit from a decline in U.S. Treasury yields and the strengthening of Asian peers on Tuesday, while awaiting key events later in the week.

Non-deliverable forwards indicate the rupee will open flat-to-slightly higher to the U.S. dollar from 83.1325 in the previous session. The rupee's intraday range on Monday was just two paisa, whereas last Wednesday and Thursday it was six paisa. India financial markets were shut on Friday.

The rupee is back to following a "highly narrow intraday range", a foreign exchange trader at a bank said.

"The hopes that we could see a wider range and a pickup in volatility have been quashed."

Asian currencies were up 0.1-0.4%, while the 10-year U.S. Treasury dipped, extending its decline from Monday. The U.S. Treasury Department said it would need to borrow less than its previous estimates, boosting demand for U.S. Treasuries. The development precedes both the U.S. Treasury Quarterly Refunding Announcement and the U.S. Federal Reserve policy review scheduled for Wednesday.

It is almost certain that the Fed will keep the policy rate within the 5.25-5.50% range. The main focus will be on whether the central bank will provide any cues on the start of the rate cut cycle, which investors are expecting.

The meeting will be watched for Fed's 2024 policy framework and hints on the timing of potential rate cuts, ANZ said in a note.

"We think the Fed, erring on the side of caution, may prefer to wait until mid-year before starting its easing cycle."

Meanwhile, oil prices inched up in Asia, following a choppy session on Monday. Brent on Monday rallied to its highest level since November on mounting tensions in the Middle East, but was not able to sustain the momentum.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.20; onshore one-month forward premium at 8 paisa

** Dollar index down at 103.43 ** Brent crude futures up at $82.5 per barrel ** Ten-year U.S. note yield at 4.06% ** As per NSDL data, foreign investors bought a net $610 mln worth of Indian shares on Jan. 28

** NSDL data shows foreign investors bought a net $44.7 mln worth of Indian bonds on Jan. 28

(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)

By Nimesh Vora