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