Indian rupee to build on rally after RBI chief reinforces currency support

MUMBAI: The Indian rupee is poised to extend its rally on Wednesday after the central bank’s steps to support the currency were ​reinforced by the governor’s indication that further measures remain an option.

The ‌Indian rupee is expected to open in the 95.04-95.12 range, traders said, after settling at 95.28 to the dollar on Tuesday.

The currency has already surged 1.5% over the ​past two sessions after the Reserve Bank of India rolled out ​a series of measures to address the dollar demand-supply imbalance ⁠that had kept the rupee under sustained pressure.

In a media interview on ​Tuesday, RBI Governor Sanjay Malhotra defended the recent forex curbs as an effort ​to discourage speculative bets.

He said the measures were meant to preserve access to currency hedges for businesses with genuine exposure, while signalling that the central bank is ready to ​take additional steps to ensure orderly rupee movement.

Malhotra added that while monetary ​policy is not typically deployed to address financial stability concerns, the two cannot be ‌entirely separated.

“The ⁠mandate of price stability cannot be achieved without financial stability, as a stable financial system is essential for the effective transmission of monetary policy,” Malhotra said.

Bankers read Malhotra’s comments as hawkish, with two saying they reinforced the ​case for a ​December rate hike, ⁠while one said the possibility of a 50 basis point increase was on the table.

“The RBI is pulling out ​all the stops to break the rupee’s prolonged pressure,” a ​currency ⁠trader at a bank said.

“But the challenge is that the underlying fundamentals remain unfavourable,” pointing to oil prices and weak capital flows.

Oil prices have continued to ⁠push higher, ​with supply concerns showing little sign of ​abating. Prices rose on Wednesday, with traders assessing the potential impact of fighting between Yemen’s Iran-aligned ​Houthis and Saudi Arabia on supply.