Rupee's RBI-cushioned weakness may find relief from softer oil
The Indian rupee is likely to open slightly higher on Friday, with a pullback in oil prices offering relief to the currency after a week of persistent pressure.
The rupee is expected to open in 95.38-95.40 range, per traders, having settled at 95.44 to the dollar on Thursday.
The local currency's roughly 0.2% weekly decline understates the extent of the strain, bankers said.
The Reserve Bank of India's near-daily intervention across multiple levels has absorbed much of the dollar demand, masking the currency's underlying weakness and keeping its moves relatively contained.
Without the RBI interventions, the rupee's losses would have been considerably larger, bankers said, noting that maturities in the non-deliverable forward market and robust dollar demand from importers were key sources of pressure.
OIL RELIEF
Brent crude fell more than 2% on Thursday and slipped further in Asian trading to around $86.50 a barrel. The pullback comes despite a U.S. threat to maintain a naval blockade of Iranian ports indefinitely. [O/R]
Oil and the broadly supportive risk tone will help the rupee at the open, though it is unlikely to see much follow-through, a currency trader at a private-sector bank said.
The RBI has "propped up" the rupee through persistent intervention, so despite oil coming down, there isn’t much room for the currency to move higher, he added.
The latest U.S. threat follows Iran's continued restrictions on traffic through the Strait of Hormuz, a key oil shipping route.
Oil prices remain underpinned by uncertainty surrounding the strait, ING Bank said in a note.
While the U.S. appears to be focusing on economic pressure rather than military escalation, significant hurdles remain before any broader agreement can be reached, it said.
