Indian rupee set for mild relief from dip in oil, fading Fed October hike bets

MUMBAI: The Indian rupee is expected to see some respite on Monday, with softer oil prices and further paring of bets on ​an October Federal Reserve rate hike easing pressure on the currency.

The ‌Indian rupee is expected to open in the 96.22-96.26 range, per traders, having settled at 96.3150 to the dollar on Thursday. Indian financial markets were shut on Friday for ​a holiday.

The rupee has been under sustained pressure, convincingly slipping past ​the 96-per-dollar level to a fresh two-month low.

A surge ⁠in US Treasury yields, which has boosted the dollar, and persistent pressure ​from high oil prices have been the main headwinds for the currency.

The Reserve ​Bank of India has remained a steady presence in the market, helping slow the rupee’s decline. However, with the 96-per-dollar level, closely watched by markets, now decisively breached, traders ​see a higher scope for the currency to weaken further.

The rupee’s slight ​opening is likely more a reflection of expectations that the RBI will step in, ‌a currency ⁠trader at a private sector bank said.

However, with 96 now decisively breached, the odds of further rupee weakness have increased, he added.

FED rate hike odds fall

The probability of a Fed rate hike at this month’s meeting has ​fallen to around ​20% after the ⁠US economy added fewer jobs than expected.

While investors initially responded by buying Treasuries, that move later reversed, underscoring the inflation ​forces weighing on US bond markets.

“Investors appeared reluctant to extrapolate ​a ⁠single soft employment print while inflation risks remained high,” Morgan Stanley said in a note.

That suggests any relief for the rupee from the sharp repricing of ⁠Fed expectations ​could prove fleeting, traders said.

Meanwhile, oil prices slipped ​on Monday as rising crude exports from the Middle East and oil stock releases by Group ​of Seven nations eased supply concerns.