India rupee to rise despite higher oil prices, widening trade deficit
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The Indian rupee is expected to open slightly higher on Monday with expectations around intervention by the central bank offsetting concerns over elevated crude oil prices and a widening trade deficit. Non-deliverable forwards indicate rupee will open at around 83.10 to the U.S. dollar compared with 83.1850 in the previous session.
It will be difficult for the dollar to take out its life time high due to Reserve Bank of India's presence, said Ritesh Bhansali, director at Mecklai Financial.
The rupee's uptick at open will probably be an adjustment after the down move on Friday, a foreign exchange trader at a private bank said. The trader expects the rupee be in a 83.10 and 83.25 range on Monday.
The rupee sold off in the last half hour of Friday's session, which traders attributed to the trade deficit data and position adjustment heading into the weekend.
India's merchandise trade deficit in August was $24.16 billion, higher than the expected $21 billion.
"Trade deficit has been rising for the last few months, led by wider net non-oil non-gold imports," IDFC First Bank said in a note.
"This reflects domestic demand conditions holding-up and weakness in exports due to external demand weakness. This combination is likely to maintain-upward pressure on trade deficit."
Rising oil prices is an additional source of risk for India's trade deficit.
Brent crude, hovering near year-to-date highs, is up 8.5% this month and has jumped 26% this quarter.
This week, investors will be keeping a keen eye on central bank decisions, beginning with the U.S. Federal Reserve on Wednesday, followed by the Bank of England and Bank of Japan.
The Fed is widely expected to keep rates unchanged and the focus will be on the growth, inflation and interest rate forecasts.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.18; onshore one-month forward premium at 10 paisa ** USD/INR NSE September futures settled at 83.1850 on Friday ** USD/INR September forward premium at 3 paise ** Dollar index at 105.24 ** Brent crude futures up 0.4% at $94.3 per barrel ** Ten-year U.S. note yield at 4.32% ** As per NSDL data, foreign investors bought a net $83 mln worth of Indian shares on Sept. 14
