Indian rupee to hold its rise past 96; RBI, soft oil counter dollar strength
- The Indian rupee is expected to open flat to slightly higher, according to traders, after rallying 0.7% in the previous session to settle at 95.91 per US dollar
MUMBAI: The Indian rupee is expected to hold above the 96-per-dollar mark at Tuesday’s open, with recent central bank intervention and softer oil prices countering the dollar’s broad strength.
The Indian rupee is expected to open flat to slightly higher, according to traders, after rallying 0.7% in the previous session to settle at 95.91 per US dollar.
The currency has staged a recovery after appearing headed toward the 97-per-dollar mark for the first time at Friday’s open.
The turnaround was driven by intervention from the Reserve Bank of India to defend the 97 level, alongside a retreat in crude oil prices.
The RBI reinforced its intervention with further dollar sales on Monday, triggering stop-losses on long-dollar positions and accelerating the rupee’s advance.
The Indian currency touched its highest level in two weeks on Monday and posted its biggest single-day advance in about six weeks.
The decline in oil prices alone would not have been enough to reverse sentiment toward the rupee, a trader at a private-sector bank said.
The key factor has been the RBI’s intervention, which has been fairly persistent. That intervention is likely to keep speculators cautious, at least over the next few days, he added.
Upbeat dollar
The dollar inched higher against most Asian currencies, while the dollar index hovered near a one-month high.
Expectations that the Federal Reserve could still deliver an interest-rate increase at Wednesday’s policy decision supported the U.S. currency, although markets remain largely positioned for rates to be left unchanged.
Traders are currently pricing in roughly a one-in-three chance of a rate hike, according to the CME FedWatch Tool.
Oil holds decline
Oil prices fell 1% with market participants weighing a pause in U.S. strikes on Iran, which has raised hope of a diplomatic solution to the conflict. Brent crude was down 1.5% at $87.06 per barrel, adding to the previous session’s 8.7% drop.