Indian rupee to hold near 95.50; RBI blunts flow-driven pressure before Warsh speech
- The Indian rupee is expected to open in the 95.50-95.55 range, according to traders, having settled at 95.54 to the dollar on Thursday
The Indian rupee is expected to open largely unchanged, anchored near 95.50 per US dollar by balanced importer demand and central bank intervention, ahead of the Fed chief's speech.
- Indian rupee's stable opening and trading range.
- Central bank intervention and importer dollar demand.
- Anticipation for Fed Chair's speech on monetary policy.
MUMBAI: The Indian rupee is likely to open little changed on Friday, with the tug-of-war between steady importer dollar demand and persistent central bank support expected to keep the currency anchored near 95.50 per US dollar ahead of the Federal Reserve chief’s closely watched speech.
The Indian rupee is expected to open in the 95.50-95.55 range, according to traders, having settled at 95.54 to the dollar on Thursday.
The currency has so far traded between 95.40 and 95.75 this week, largely repeating the rangebound pattern seen last week.
For now, the rupee appears to have “found a temporary equilibrium,” a currency trader at a bank said.
Interbank traders increasingly see dollar/rupee operating within a broader 95.00-96.00 band, with neither side having a compelling reason to force a breakout, he added.
Oil prices near $90 a barrel have been largely absorbed by the market, bankers said, while the Reserve Bank of India’s likely continued intervention is expected to make a move beyond 96.00 difficult.
Meanwhile, moves towards 95.00 are likely to draw fresh hedging demand from importers, according to bankers.
The result is a market effectively bracketed by the RBI on one side and dollar demand from importers on the other.
Beyond spot dollar/rupee, traders will be watching the one-day swap cost, demand for dollars at the RBI reference rate and forward premiums after Thursday’s choppy trading across these markets.
All eyes on Warsh
Market participants are now keenly awaiting Fed Chair Kevin Warsh’s debut speech in Jackson Hole, Wyoming, for clues on how he would approach monetary policy and tame inflation.
“While we do not expect him to offer forward guidance, markets are hoping he will reduce some of the uncertainty surrounding the Fed’s reaction function,” ANZ Bank said in a note.
While Warsh is unlikely to be forthcoming on this front, the recent volatility in rates markets means that offering too little could trigger an adverse market reaction, it said.