Indian rupee weakness cushioned by central bank intervention, shorts grow wary

MUMBAI: The Indian rupee ended little changed on Monday, wedged between firmer oil prices and likely intervention by the central bank, which traders reckon has started to deter fresh short positions on the South Asian currency.

The Indian rupee closed at 95.30 per dollar, marginally weaker than its close at 95.2075 in the previous session.

State-run banks were spotted offering dollars through most of the session, traders said, most likely on behalf of the Reserve Bank of India.

The dollar sellinghas helped the rupee defy rising oil prices as talks to reopen the Strait of Hormuz were tempered by Iran’s insistence that the United States must satisfy several demands before the key energy route can reopen.

Amid the uncertainty, the RBI’s resolute defence of the currency over recent trading sessions has made traders wary of betting against the rupee.

French lender’s India treasurer pegs Indian rupee floor near ‘fair value’ of 96 per dollar

“The 96 level seems to be emerging as a hard line against rupee weakness,” a trader at a private bank said, noting that the unit is likely to continue strengthening in the near term.

Analysts at ING said in a note that they remain “constructive on the INR,” on the back of policy measures aimed at drawing dollar inflows. The firm expects the rupee to rise to around 94.50 in three months and 94 in six months.

Asian currencies were mixed on Monday, with the Indonesian rupiah up 0.7%, while the Korean won dipped 0.7%. Regional equities were mostly in the green but Indian stocks struggled to make headway and ended nearly flat.

The focus this week is on inflation data from both India and the U.S., for cues on the future path of benchmark borrowing costs.

A Reuters poll of 40 economists has forecast that India’s inflation rate, measured by the annual change in the consumer price index (CPI), will rise to 4.50% in July from 4.38% in June.