Indian rupee may find breathing room on IPO-linked inflows, oil retreat

MUMBAI: The Indian rupee is set to open modestly stronger on Friday, soothed by a retreat in oil prices and expectations ​of foreign portfolio inflows linked to a large initial public offering, ‌though the currency remains on track for a weekly decline.

Oil prices eased on ​Friday, extending losses into a third session, as hopes of alternate ways for barrels ​from the Middle East to reach markets outweighed concerns about ⁠strikes between Saudi Arabia and Yemen’s Houthis. Brent oil was last down ​0.7% at $104.1 per barrel.

Traders and analysts are also anticipating sizeable foreign institutional investor ​demand for the National Stock Exchange of India’s $2.3 billion IPO, which is among India’s largest on record and closes for subscription on Monday.

These two factors, combined with a modest retreat in ​US bond yields, may grant the rupee some breathing room, but market participants expect ​dollar demand from local importers to stand in the way of a meaningful recovery.

“Oil remains ‌key, ⁠as prices at $80 per barrel or above, coupled with seasonal deterioration in the current account deficit toward the end of Q3, remain key risks to INR,” analysts at BofA Global Research said in a note.

“That would need either consistent ​capital inflows or ​RBI support to ⁠keep USD/INR range-bound.”

Elsewhere, Asian currencies were trading between 0.1% and 0.4% stronger while regional stocks also gained.

Investors are keeping an eye on the ​Bank of Japan’s monetary policy decision, with the central bank ​set to ⁠raise interest rates to a 31-year high and pledge to deliver more to counter inflation risks.

Monetary policy actions remain in focus globally amid inflationary pressures generated by ⁠the Iran ​war.

The US Federal Reserve raised rates earlier ​this week while the Bank of England on Thursday warned it may have to hike if ​the Middle East war drags on.