Rupee to decline on poor risk appetite, weakness in Asian peers

MUMBAI, Aug 2 (Reuters) - The Indian rupee is expected to open lower on Wednesday on the back of a decline in Asian currencies and weak risk appetite after rating agency Fitch cut the U.S. credit rating.

Non-deliverable forwards indicate rupee will open at around 82.32-82.34 to the U.S. dollar compared with 82.2550 in the previous session.

\“Lets see if todays session is any different from yesterdays and if there is a follow up to the opening move higher (on USD/INR),\” a forex trader at a bank said.

The rupee on Tuesday had declined at the opening, but ran into support at 82.30-82.35.

U.S. equity futures and Asian shares dropped on Wednesday after Fitch downgraded the U.S. long-term foreign currency ratings to AA+ from AAA, reflecting likely fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations.

Asian currencies dropped while the dollar index rose to 102.16. The 10-year U.S. yield inched lower in the Asia session.

\“The Fitch downgrade should have minimal negative impact on the allure of U.S. Treasuries,\” DBS Research said in a note. \“High inflation and growth remain the key triggers for bond demand.\”

In the data out on Tuesday, a report suggested U.S. manufacturing might be stabilising at weaker levels in July amid an improvement in new orders, though factory employment dropped to a three-year low.

U.S. private payrolls data is due later in the day. A report on how the U.S. non-manufacturing sector is faring is out on Thursday, followed by the non-farm payrolls report on Friday.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 82.40; onshore one-month forward premium at 7 paisa

** USD/INR NSE August futures settled on Tuesday at 82.3225

** USD/INR August forward premium at 6.5 paisa

** Dollar index up at 102.15

** Brent crude futures up 1.1% at $85.8 per barrel

** Ten-year U.S. note yield at 4.03%

** As per NSDL data, foreign investors sold a net $94.1mln worth of Indian shares on July 31

** NSDL data shows foreign investors bought a net $31.3mln worth of Indian bonds on July 31

Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil

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