Indian rupee traders on alert for RBI follow-through amid risk-off mood

MUMBAI: The Indian rupee is likely to open little changed to marginally weaker on Thursday, with traders watching for the Reserve Bank of India’s follow-through to its heavy intervention amid a risk-off backdrop.

The 1-month non-deliverable forward indicated the rupee will open in the 90.35-90.45 range versus the US dollar, having settled at 90.38 on Wednesday.

The RBI sold dollars aggressively on Wednesday with the explicit intent of pushing the dollar/rupee pair lower, bankers said, and breaking the sense of inevitability that had crept into the rupee’s decline.

Persistent one-way positioning, importer hedging and momentum-driven buying piled on constant pressure on the rupee, prompting the central bank to step in decisively.

The intervention helped the local currency rally past the 90-per-dollar mark on the interbank order matching system and logging its biggest single-day advance in two months.

“Sustained follow-through (by the RBI) would help reset expectations more. In its absence, it (dollar/rupee) is likely to resume its upward drift,” a banker said.

He pointed out that the RBI has done this before this year, following up heavy intervention with another round of sizeable dollar sales.

Another banker said there are probably still meaningful long dollar positions in the market, and one more follow-through from the RBI would likely flush them out.

Anil Bhansali, head of treasury at Finrex Treasury Advisors, said he is advising importer clients to use the pullback in dollar/rupee triggered by the RBI’s intervention to lock in hedges.

Importers are being encouraged to treat any near-term softness a tactical window to hedge rather than a signal of a sustained reversal in the currency’s trend, he said.

Meanwhile, risk sentiment, while not a primary driver at the moment, remains mildly unsupportive for the rupee.

Tech-sector jitters dented risk appetite, with the Nasdaq Composite sliding 1.8%. Asian equities drifted lower, tracking the US selloff.