The Indian rupee opened 3 paise higher at 95.51 against the US dollar on Friday, with steady importer demand for the greenback and continued Reserve Bank of India (RBI) intervention expected to keep the currency around the 95.50 level ahead of a closely watched speech by the Federal Reserve chief.
The rupee has remained range-bound this week, trading between 95.40 and 95.75, broadly mirroring the narrow range seen in the previous week.
According to a Reuters report, a currency trader at a bank said the rupee appears to have “found a temporary equilibrium” at current levels.
Bankers said oil prices hovering near $90 a barrel have largely been absorbed by the market, while continued RBI intervention is expected to limit any move beyond the 96.00 level.
At the same time, a decline towards 95.00 is likely to trigger fresh hedging demand from importers, according to bankers. This has effectively created a trading band for the rupee, with RBI support limiting downside pressure on the currency while importer dollar demand provides a floor.
Crude prices offer some relief to rupee
Brent crude has declined for a fourth consecutive session, slipping below $90 a barrel, as hopes grow that talks involving Iran and Qatar could pave the way for the reopening of the Strait of Hormuz.
The decline in oil prices had supported the rupee earlier this week, helping the currency post its biggest single-day gain in nearly a month on Tuesday. However, the rupee surrendered some of those gains on Thursday, settling at 95.54 against the US dollar, down 0.1%, as month-end importer demand offset the positive impact of softer crude prices, according to market experts.
US bond yields add to dollar support
Long-term US borrowing costs remain another factor supporting the dollar. Despite efforts by Washington to ease pressure on longer-term yields through debt buybacks, the 30-year US Treasury yield has climbed back to its highest level since 2007, reflecting continued investor demand for higher returns on US government debt.
Meanwhile, the US labour market offered a positive signal, with initial jobless claims falling to 203,000 last week, below the 208,000 estimate and the previous week’s 207,000.
Dollar direction key for rupee
Market experts said the latest data present a broadly hawkish backdrop, although investors are largely expecting Warsh to maintain a neutral stance. With a neutral message already reflected in market pricing, any deviation from expectations could trigger a sharp move in the dollar.
A more hawkish-than-expected stance could strengthen the US dollar and put renewed pressure on the rupee, while a dovish signal could provide some relief to the Indian currency.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, the FCNR(B) window, open until 31 August, could continue to offer near-term rupee support, with 95.15–95.20 as a key support zone. The broader bias, though, still favours depreciation, with USD/INR likely drifting toward 96.20–96.50 over the coming weeks. Today’s Jackson Hole speech remains the key swing factor for the near term.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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