Rupee may withstand oil, Fed pressures with RBI support
The Indian rupee is poised for a muted opening on Monday, with the central bank's recent aggressive presence likely to temper the impact of higher crude prices and the increased likelihood of a U.S. Federal Reserve rate hike next week.
The rupee is expected to open in the 94.46-94.50 range, per traders, having settled at 94.4850 to the dollar on Friday.
The rupee's near 1% jump last week has taken some of the bearishness out of the market, with the Reserve Bank of India's sustained presence helping absorb the impact of costlier oil and a more hawkish Fed outlook, traders said.
The RBI has shifted the tone for the rupee, a currency trader at a bank said. The focus now is on whether the central bank remains this active and provides the currency enough support to sustain or to extend the move, he said.
The rupee will need the help of the RBI to begin the week with oil prices extending last week's rally and the U.S. jobs data on Friday making it more likely that the Fed will raise interest rates at its September 15-16 meeting.
Tit-for-tat strikes between the U.S. and Iran on vessels sailing in the Strait of Hormuz and other areas heightened concerns of a prolonged supply disruption from the Middle East, lifting Brent crude to $97 a barrel.
Meanwhile, U.S. nonfarm payrolls surged by 162,000 jobs last month, outpacing expectations of economists, who had forecast they would increase by 56,000. Adding to the robust picture, a previously reported drop of 23,000 for July was replaced by a 21,000 addition for that month.
"With Fed Chair Kevin Warsh describing the US at full employment, this outcome has nudged expectations of a September rate hike higher," ING Bank said in a note on Friday.
However, the final decision hangs on Friday's inflation print, it said.
