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Rupee seen higher at open as oil tumbles, dollar retreats

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MUMBAI — The Indian rupee is tipped to open higher against the U.S. currency on Thursday, tracking a pullback in the dollar index and a decline in oil prices to over seven-month lows.

The rupee is expected at around 79.70 in initial trades, up from 79.90 in the previous session.

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The dollar index inched lower in Asia trading to near 109.75, adding to Wednesday’s decline. Asian currencies rose, halting the recent slide.

The fall in Treasury yields and a better risk appetite dented demand for the dollar. The S&P 500 Index surged 1.8% overnight while the 10-year Treasury yield fell about 11 basis points from the highs.

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Meanwhile, Brent crude futures slipped to the lowest level since February on Wednesday, after dropping more than 5% on concerns over demand.

Oil prices are now down more than 20% since the beginning of August, fueled by fears of a slowdown in China and policy tightening by the Federal Reserve and other central banks.

Concerns over the global economic outlook are “in a way” helping the rupee, as it is leading to a “sizeable” pullback in oil and other commodities, a trader at a Mumbai-based bank.

“Obviously, growth concerns are likely to lead to portfolio outflows from emerging markets, but since the turn of July that has not been a problem for India.”

Foreign investors poured in more than $6 billion into Indian equities in August, according to data from NSDL website. Investors have bought about $330 million, thus far this month.

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Global markets will now shift focus to on Fed Chair Jerome Powell’s speech later in the day. Ahead of Powell’s speech, policymakers maintained a hawkish tone. Boston Fed President Susan Collins said that bringing inflation back down to 2% is the Fed’s main job, and while it has raised rates significantly, “there’s more to do.”

KEY INDICATORS: ** One-month non-deliverable rupee forward at 79.91; onshore one-month forward premium at 20.7 paise ** USD/INR NSE Sep futures closed on Wednesday at 80.0775 ** USD/INR forward premium for current month is 13.3 paise ** Dollar index at 109.74 ** Brent crude futures at $88.6 per barrel ** Ten-year U.S. note yield at 3.25% ** SGX Nifty nearest-month futures up 0.8% at 17,762 ** As per NSDL data, foreign investors bought a net $213.4mln worth of Indian shares on Sep. 6

** NSDL data shows foreign investors bought a net $62.2mln worth of Indian bonds on Sep. 6 (Reporting by Nimesh Vora)

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