Lower Fed hike odds, oil dip lend RBI hand in supporting Indian rupee

MUMBAI: The Indian rupee faces a less challenging backdrop on Wednesday, after a fall in US rate-hike expectations and slightly ​softer oil tempered pressure on a currency that has needed ‌regular central bank support.

The Indian rupee is expected to open at 95.94-95.99 per dollar, according to traders after closing Tuesday at 95.98. It fell to a two-month ​low of 96.1475 before recovering amid likely Reserve Bank of ​India intervention.

Over the past few weeks, the rupee has repeatedly ⁠needed RBI intervention to moderate its decline, with high oil ​prices, rising US Treasury yields, weak portfolio flows and increased hedging demand ​weighing on it.

The RBI has been managing the rupee, using its increased FX reserves firepower to prevent external pressures from translating into excess pressure on the currency.

The ​RBI’s resolve to keep the rupee anchored around the 96-per-dollar mark ​is increasingly evident, putting a floor under the currency while pressure mounts, said ‌Amit ⁠Pabari, managing director at FX advisory firm CR Forex.

A dovish repricing in expectations for another Federal Reserve rate hike next month relieves pressure on the RBI to an extent.

The odds have fallen to 44% from ​nearly 70% amid ​softer US activity ⁠data and more cautious signals from policymakers about the need for an immediate follow-up move.

US consumer confidence ​fell to its lowest level in more than 12 ​years ⁠in September, while New York Fed President John Williams said there was “no need for urgency” after the September rate increase.

Williams noted that the central ⁠bank ​has time to assess incoming data before ​deciding on its next move.

Meanwhile, oil prices dropped about 2.5% on Tuesday amid signs that ​Middle East exports were recovering.