Oil-driven dollar demand to pressure Indian rupee; RBI blunts losses

MUMBAI: The Indian rupee is expected to remain under pressure through Wednesday’s session, with Brent crude nearing $90 a barrel and ​weaker Asian currencies weighing on sentiment, while the central bank ‌is likely to limit the decline.

The Indian rupee is expected to open in the 95.46-95.48 range, traders said, after settling at 95.4350 per dollar on Tuesday.

The local ​currency has remained under pressure since breaking past the 95 level ​last Wednesday, with oil prices continuing to rise amid ⁠uncertainty surrounding an end to the U.S.-Iran conflict.

With Brent already up ​7% this week and approaching $90 a barrel, importers are stepping up hedging, ​bankers said.

The resulting dollar demand is adding pressure on the rupee and offsetting the positive sentiment from Reserve Bank of India interventions.

In the two trading sessions this ​week, the RBI has been selling dollars through state-run banks to ​limit the rupee’s losses, and traders say the currency would likely have weakened more ‌without ⁠the support.

The central bank sold dollars near the 95.40 level on Tuesday and around 95.25-95.30 on Monday.

“The RBI is on the offer (on dollar/rupee) throughout the day. The problem is that with oil risk back, underlying ​demand is now ​pushing through,” a ⁠currency trader at a bank said.

The trader expects the RBI to resist a move above 95.50.