Indian rupee likely pinned near 95 as RBI defence counters oil headwinds

MUMBAI: The Indian rupee is likely to be under pressure from high oil prices at Monday’s open, with the central bank’s dollar sales ​expected to support the currency and keep it near what traders ‌perceive to be the central bank’s soft defence line.

The Indian rupee is expected to open in a 94.92 to 94.98 range, per traders, having settled at 94.96 to the dollar ​on Friday.

The Indian rupee has oscillated around the 95-per-dollar mark in recent ​sessions, briefly strengthening past the level before struggling to sustain it. ⁠Subsequent declines past that level have repeatedly met resistance.

The pattern suggests that ​the Reserve Bank of India may be selling dollars to limit weakness past ​the 95 level, making the level an important near-term support for the currency, a currency trader at a bank said.

The rupee last week posted its best weekly performance in nearly ​four years, buoyed by the RBI’s measures to support the currency and ​repeated dollar sales in the spot market.

The RBI has stepped up its intervention to prop ‌up ⁠the rupee, which remains under pressure from oil prices and capital outflows.

The central bank’s stepped-up defence of the rupee alongside sell/buy swaps is reflected in foreign exchange reserves. The country’s reserves have shed nearly $60 billion since hitting an all-time high ​in the first week of September, ​falling to $726 ⁠billion through October 9.

Oil a pain point

Oil remains a key pressure point for the rupee, with Brent crude briefly climbing ​above $110 a barrel on Friday for the first time ​since May. ⁠

Prices dipped slightly on Monday, with Brent trading around $108 a barrel after US President Donald Trump waived new sanctions on Russia and tariffs on good from Russia, potentially paving ⁠the ​way for increased Russian fuel exports.

There is broad ​consensus among analysts and investors that the RBI’s efforts to support the rupee will go only ​so far unless oil prices retreat.