IGI Logo

Below the Perspective on Currency and Commodities by Mr. Ashish Rajodiya, Head of Commodities, PL Capital

The rupee has opened Monday with a rebound of around 1% to near 95.80 against the dollar, from Friday's close of 96.71, after the RBI stepped directly into the market. From today it will sell dollars to Indian Oil, HPCL and BPCL to cover their entire daily requirement until further notice, taking a major source of dollar demand out of the spot market. The central bank has also tightened its rules on rupee derivatives, following last week's 25-basis-point repo rate hike to 5.50%, the first increase in nearly four years. The pressure it is pushing back against is broad. Foreign portfolio investors have pulled about Rs44,000 crore out of equities so far this month, taking this year's outflows past Rs 3 lakh crore. Brent still hovers above $100 a barrel, and US Treasury yields above 5.2% keep the dollar firm. The catch is the cost: dollar sales to oil companies will draw down reserves, which already slipped by nearly $13 billion in the week to October 2. On the charts, the pair has support at 94.90 and 94.10, with resistance at 97. The next tests are India's September retail inflation print, expected to show a pickup to around 5.4%, and US CPI on Wednesday. A hotter reading on either would revive the case for tighter policy and could push the pair back toward 97, while softer data and cooler crude would give the rupee room to test the 94.90 support.

Above views are of the author and not of the website kindly read disclaimer