Indian rupee to edge higher as oil slips; inflow haul caps bearish bets
The Indian rupee is expected to open modestly stronger on Tuesday, as a decline in crude oil prices and long-dated US Treasury yields supports risk sentiment, with importer hedging demand capping gains for the currency.
India's measures to strengthen its balance of payments have raised $143.6 billion, data released on Monday showed, helping the central bank keep a firm lid on expectations for rupee depreciation.
The currency will likely open around 95.75 to 95.80 per dollar, traders said, marginally higher than its close at 95.8150 in the previous session.
Brent was hovering around $100 per barrel heading into potential US-Iran talks at the United Nations General Assembly this week. Oil prices remain a key monitorable for the rupee as investors gauge the impact on India's import bill along with the prospect of rate hikes by the central bank.
The Federal Reserve and the Bank of Japan raised rates last week and traders have raised wagers on policy tightening by the Reserve Bank of India as well.
The rupee "is likely to cling to the 95-96 band heading into the policy decision," a trader at a state-run bank said, adding that forward premiums may show a more pronounced reaction than the spot rupee on rate calls.
The Indian central bank has been intervening frequently in the FX market to support the rupee and traders expect this to persist.
Analysts at Natixis said that the RBI will need to hike rates to support the rupee and have pencilled in 50 bps of hikes by the end of 2026.
Traders are pricing in a 56% chance of a US hike in October, compared with 43.5% a week earlier, the CME FedWatch tool showed.
