Indian rupee poised to track weaker Asia in risk-off mood; RBI intervention in play

MUMBAI: The Indian rupee is set to open weaker on broad risk aversion and softer Asian peers, while markets look for signs of central bank action to prevent a break past a psychological threshold.

The 1-month non-deliverable forward indicated the rupee will open in the 90.78-90.82 range versus the US dollar, having settled at 90.65 on Monday.

The local currency has traded in a narrow range over the past two sessions, lacking clear directional bias. Whenever the rupee inches higher, sufficient dollar demand from importers and speculative accounts emerges, while declines are met with caution amid fears that the Reserve Bank of India could intervene.

The caution stems from the central bank’s surprise dollar sales before local market opened last week to push rupee higher, prompting expectations that the RBI will lean against any breach of 91.

Foreign investors returning to selling in Indian equities over the past two sessions is adding to pressure on the rupee. Meanwhile, bankers continue to flag regular dollar demand from oil companies and NDF-linked maturities.

“Unless we see a decisive break of sort of key levels, it’s largely flow-driven trade with the RBI in the backdrop,” a Mumbai-based FX trader said.

“If 91 gives way, we could see a quick extension higher. However, the market is wary of pushing too hard.”

The rupee will have to contend with India’s merchandise trade deficit widening to a three-month high of $34.68 billion in January and the wider-than-expected goods trade deficit driven by a rise in gold and silver imports.

Asia struggles, us equity futures slide

Asian currencies and shares dropped. Futures indicated that U.S. equities will open lower when they resume trading on Tuesday.

Markets are awaiting signals later this week on the potential timing of the Federal Reserve rate cuts, with minutes from the Fed’s last meeting and advance U.S. GDP figures due.