Rupee may find breathing room on IPO-linked inflows, oil retreat
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.
The rupee is expected to open in a 95.75-95.80 per dollar range, traders said, having settled at 95.93 on Thursday.
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.
