Indian rupee may open lower on weakness in Asian peers, tepid flows

MUMBAI: The Indian rupee is likely to open weaker on Tuesday, tracking losses in Asian peers, with traders noting that underlying flows are ​compounding pressure and limiting near-term upside.

The Indian rupee is expected to open ‌in the 94.60–94.62 range, per traders, after declining 0.2% to 94.54 on Monday.

The currency, which had recovered to near the 94 level from an all-time low of around ​97 hit mid-last month due to a drop in oil prices ​and steps by the central bank to support it, has largely ⁠traded in a range in recent sessions.

It has repeatedly struggled to move ​past the 94.00–94.20 region despite attempts driven by the unwinding of short rupee ​positions. The recent strength in the dollar has capped its upside, while bankers point to persistent importer hedging following the rupee’s recovery and tepid equity flows.

On Monday, the rupee ​touched an intraday high of 94.25 before retreating.

For now, the strategy is ​to buy dollar/rupee around 94.20–94.30 for a 30–40 paisa move, and sell in the 94.70–94.90 ‌zone, ⁠where the Reserve Bank of India appears to be defending, a currency trader at a private bank said.

Oil prices continue to support the rupee, with Brent crude holding near levels seen before the Iran conflict in late ​February. While oil has ​pulled back to ⁠pre-war levels, the rupee remains weaker than levels around 91 seen before the conflict.

Brent crude slipped to about $72.50 on ​Tuesday, with investors focused on the prospect of Iran–U.S. ​talks in ⁠Doha.

Meanwhile, the dollar index inched up to 101.26. Among Asian currencies, the Indonesian rupiah led losses, while the Japanese yen hovered near a 40-year low against ⁠the ​dollar.

Expectations of Federal Reserve rate hikes later this ​year have supported the dollar. The Fed’s latest meeting was viewed as hawkish by analysts, prompting ​a repricing of rate hike expectations.