Indian rupee faces pressure from oil headwinds, lack of inflow support

MUMBAI: The Indian rupee is likely to come under pressure at Monday’s open, potentially slipping below the psychological level of 95, ​with an oil price overhang compounded by the likely absence ‌of last week’s supportive flows.

The Indian rupee is expected to open in the 95.00-95.04 range, per traders, after settling at 94.94 per dollar on Friday.

The Indian rupee traded between ​94.32 and 94.97 last week, moving toward the firmer side ​of the range on inflows linked to the Jio Platforms ⁠IPO and position unwinding.

The allotment is on Monday, with the shares scheduled ​to list on the bourses on Wednesday.

The IPO attracted robust foreign institutional ​investor demand, with part of the associated flows likely hitting the spot market and lending support to the rupee, bankers said.

The flow support seen last week will ​not recur, and oil remains a drag on sentiment, a currency trader ​at a private sector bank said. That tilts the rupee’s risk balance to the ‌downside, ⁠with central bank intervention remaining the key, he added.

Dollar demand from oil refiners is not currently a direct factor for the rupee with the Reserve Bank of India’s special window letting them meet their foreign-exchange requirements ​outside the usual ​market.

However, Brent crude ⁠at near $115 a barrel remains a key macro concern for the rupee, worsening the external outlook, driving hedging ​demand and dampening foreign portfolio flows.

Brent climbed more than ​6% ⁠last week to a six-month high, with ongoing attacks on Saudi Arabia keeping supply concerns in focus.

Beyond oil, the Federal Reserve’s policy decision will be ⁠a ​key focus this week. While a pause ​is widely expected, markets will be looking for clues on the rate outlook, particularly whether another ​hike is likely in December.