Indian rupee RBI-cushioned weakness may find relief from softer oil

MUMBAI: The Indian rupee is likely to open slightly higher on Friday, with a pullback in oil prices offering relief ​to the currency after a week of persistent pressure.

The ‌Indian rupee is expected to open in 95.38-95.40 range, per traders, having settled at 95.44 to the dollar on Thursday.

The local currency’s roughly 0.2% weekly decline understates ​the extent of the strain, bankers said.

The Reserve Bank of ​India’s near-daily intervention across multiple levels has absorbed much of ⁠the dollar demand, masking the currency’s underlying weakness and keeping ​its moves relatively contained.

Without the RBI interventions, the rupee’s losses would have ​been considerably larger, bankers said, noting that maturities in the non-deliverable forward market and robust dollar demand from importers were key sources of pressure.

Oil relief

Brent crude ​fell more than 2% on Thursday and slipped further in Asian ​trading to around $86.50 a barrel.

The pullback comes despite a US threat to maintain ‌a ⁠naval blockade of Iranian ports indefinitely.

Oil and the broadly supportive risk tone will help the rupee at the open, though it is unlikely to see much follow-through, a currency trader at a private-sector bank ​said.

The RBI has “propped ​up” the rupee ⁠through persistent intervention, so despite oil coming down, there isn’t much room for the currency to move ​higher, he added.

The latest US threat follows Iran’s ​continued restrictions ⁠on traffic through the Strait of Hormuz, a key oil shipping route.

Oil prices remain underpinned by uncertainty surrounding the strait, ING Bank said in ⁠a ​note.

While the US appears to be focusing ​on economic pressure rather than military escalation, significant hurdles remain before any broader agreement ​can be reached, it said.