Indian rupee may retest 91 level again; flows, weak risk test RBI’s resolve

MUMBAI: The Indian rupee is set for another run at 91 per dollar on Friday, pressured by risk-off flows and modest dollar strength, putting the central bank’s defence of that level under scrutiny.

The one-month non-deliverable forward indicated the rupee will open in the 90.98-91.02 range versus the US dollar, having settled at 90.9050 on Thursday.

The currency has faced sustained pressure this week from dollar demand tied to NDF maturities and routine corporate flows, while a cautious near-term outlook has prompted importers to add hedges.

Weakness in domestic equities has compounded the strain on the rupee.

According to bankers, absent central bank intervention, the rupee may have already broken decisively beyond 91.

Its inability to capitalise on rallies in other Asian currencies underscores the persistent underlying weakness.

The dollar/rupee’s repeated moves toward the 91 figure have the impact of keeping dollar long positions “interested,” more so since there are no major dips when RBI intervenes, a currency trader at a bank said.

He added that the RBI has been offering dollars at various levels to cap the upside rather than actively driving the pair lower, a strategy that does not materially hurt existing long-dollar positions.  

Risk off weighs on Asia FX

Asian currencies were mostly weaker on Friday amid fragile risk appetite, after US equities fell overnight and futures signalled further losses.

Asian shares largely tracked Wall Street lower. Investor sentiment was dented by concerns about overstretched technology valuations, while persistent tensions in the Middle East kept oil markets jittery, adding to the cautious tone.

That risk aversion was evident in US Treasuries, which drew safe-haven demand and pushed yields lower despite better-than-expected US jobless claims data.