RBI backstop to temper rupee pressure from tepid Asia, outflows

MUMBAI: The Indian rupee is poised inch higher on Friday on expectations of central bank support, which are likely to counter tepid Asian cues and continued portfolio outflows, traders said.

The 1-month non-deliverable forward indicated the rupee will open in the 89.90-89.94 range versus the US dollar, having dropped 0.15% to 90.0175 on Thursday.

The currency slipped in the last session despite another bout of intervention by the Reserve Bank of India.

While it climbed to near 89.75 following RBI’s dollar sales, the rally quickly fizzled, echoing a similar lack of follow-through after Wednesday’s intervention.

“Importers are hedging pretty aggressively when the dips (on dollar/rupee) come. And, portfolio flows haven’t picked up and the trade-deal headlines aren’t convincing,” a currency trader said.

“It’s no surprise that the rupee is not making much headway despite all the RBI intervention.”

Explaining Friday’s higher opening, he said the dollar/rupee slipped quickly toward 89.90 after market hours, which was expected to influence how the currency opens.

On the U.S.-India trade deal, President Donald Trump recently warned of higher tariffs on New Delhi over its purchases of Russian oil and has backed a bill to sanction China and India over those imports.

Bankers said the latter is currently seen a less immediate risk.

Meanwhile, Asian cues have been broadly unsupportive of the rupee this week.

Regional currencies were mostly lower on the day, extending losses before a key U.S. jobs report that is expected to shed light on the labour market and the Federal Reserve’s policy path.

Economists polled by Reuters expect US non-farm payrolls to rise by 60,000 and see the unemployment rate at 4.5%.

“Barring a dramatic data print, the unemployment rate is likely to be the more impactful number,” ING Bank said.

The jobless rate stood at 4.6% in November, and economists at Morgan Stanley expect it to hold there, which they said would keep the Federal Reserve on track for a January rate cut.