Indian rupee seen steady after holiday as Fed hike risk, hedging balance out RBI, oil relief

MUMBAI: The Indian rupee is likely to open little changed on Thursday, with lower oil prices and the central bank’s sustained ​intervention offsetting the prospect of a Federal Reserve rate hike next ‌month and persistent dollar demand for hedging.

The Indian rupee is expected to open in the 95.40-95.44 range, per traders, having settled 0.35% higher at 95.4125 to the dollar on Tuesday. ​India FX and money markets were shut on Wednesday.

For interbank traders, ​the dollar/rupee pair has settled into a 95.00-95.80 range in ⁠the near term, with persistent Reserve Bank of India intervention firmly limiting ​moves to the 96 handle.

The RBI has stepped in almost daily over ​the past two weeks, particularly when USD/INR has moved into the 95.60-95.80 range, to support the rupee, traders say.

On Tuesday, the central bank’s intervention was reinforced by a retreat ​in oil prices, helping the rupee post its biggest single-day advance in ​nearly a month.

Brent crude extended its decline in Asian trading on Thursday, potentially heading ‌for ⁠a fourth consecutive day of losses.

The nearest-month Brent futures contract was trading near $87.30 a barrel, well below its recent high of around $95.80.

With oil prices pulling back and the RBI firmly capping the upside in dollar/rupee, it ​looks like more ​rangebound action is ⁠in store, said a currency trader at a bank.

He added that robust dollar demand from importers seen in recent ​sessions is likely to continue, keeping dollar/rupee downside limited.

Dollar ​finds fed ⁠support

The dollar index held near an eight-day high on Thursday after U.S. inflation and other economic data slightly lifted expectations that the Fed could raise ⁠interest rates ​next month.

The inflation data revived the rate-hike ​debate, putting the spotlight on Fed Chair Kevin Warsh’s upcoming Jackson Hole speech for a clearer read ​on where interest rates are headed.