Rupee to receive early lift from Asian peers; traders doubt follow through

MUMBAI, May 23 (Reuters) - The Indian rupee may find brief support at the open on Friday, buoyed by strength in Asian peers, although scepticism persists about the durability of the initial up move.
The 1-month non-deliverable forward indicated a open in the 85.94 to 85.96 range versus 86.0025 in the previous session.
The rupee is on track for its third straight weekly decline, having dropped more than 1.5% this month — making it one of the worst performers in the Asian FX space.
In contrast, the offshore Chinese yuan has advanced 1% this month, the Korean won is up nearly 4%, while the Indonesian rupiah and Thai baht have each added around 2%.
The rupee's underperformance has been largely attributed to immediate dollar outflows, hedging and the unwinding of long rupee positions. Notably, the currency has closed at its intraday low for the past three sessions, reflecting the persistent downside pressure.
'The rupee's recent behaviour has been unusual, to say the least. Like me, I'm sure most didn't expect to see 86 this quickly,' a Mumbai-based currency trader at a local bank remarked.
Traders are sceptical that Friday's opening dip in USD/INR will hold, given the recent tendency for dips to fade.
"Today, the odds are stacked against the opening move lower sustaining, considering the lack of staying power seen in recent dips," the trader said.
Asian currencies were up on Friday, extending their weekly advance. The rise in U.S. Treasury yields on the back of fiscal concerns has not had an impact on Asian currencies,
Expectation of trade and FX deals with the U.S was likely fuelling the move higher in Asian currencies, MUFG Bank said in a note.
Whether this divergence can continue will likely be determined by future trajectory of tariffs and whether the extent of rise in U.S. yields constrain growth and risk sentiment, it said.
** One-month non-deliverable rupee forward at 86.10; onshore one-month forward premium at 14 paise
** Dollar index down at 99.64
** Brent crude futures down 0.8% at $63.9 per barrel
** Ten-year U.S. note yield at 4.52%
** As per NSDL data, foreign investors bought a net $265.6 mln worth of Indian shares on May 21
** NSDL data shows foreign investors bought a net $6.2 mln worth of Indian bonds on May 21 (Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)

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