Oil swings keep rupee outlook precarious, foreign stock sales amplify strain
The Indian rupee is expected to retain a bias towards depreciation on Tuesday as uncertainty over U.S.-Iran peace talks keeps oil prices volatile, while persistent foreign selling of Indian stocks heaps additional pressure.
The rupee is expected to open in a range of 95.10-95.15 per dollar, traders say, having settled at 94.99 on Monday.
Despite persistent portfolio outflows and oil prices holding in the vicinity of $100 per barrel, the rupee has averted notable depreciation in recent sessions due to firm central bank interventions in the foreign exchange markets, per traders.
Overseas investors have net sold about $2.5 billion worth of Indian stocks in the last two trading sessions, according to exchange data. Since the Iran war began in late February, the outflow tally stands at nearly $25 billion.
Brent crude oil prices held on to most of the previous session's sharp gains in early Tuesday trade, on uncertainty around talks between the United States and Iran.
U.S. President Donald Trump said on Monday talks with Iran were ongoing, while Tasnim news agency reported that Tehran had suspended indirect negotiations with Washington.
"We continue to view the Indian Rupee as vulnerable across a range of scenarios on the Strait of Hormuz, with USD/INR likely moving towards 98.00 levels and even 100.00 is in sight if the conflict prolongs or escalates," analysts at MUFG said in a note.
The firm expects the Indian central bank to hike rates by 25 bps later this week, even as a majority of economists polled by Reuters see the Reserve Bank of India keeping policy rates unchanged.
Moves in other Asian currencies were subdued while regional stock markets traded mixed. Equity futures signalled Indian stocks are poised for a weaker start.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 95.49; onshore one-month forward premium at 31.5 paise
** Dollar index up at 99.19
** Brent crude futures down 0.5% at $94.5 per barrel
** Ten-year U.S. note yield at 4.45%
** As per NSDL data, foreign investors sold a net $2,301.2 mln worth of Indian shares on May 29
** NSDL data shows foreign investors sold a net $78.5 mln worth of Indian bonds on May 29
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