Rupee enters new week balancing RBI boost, importer demand and lacklustre Asia
The Indian rupee is likely to open little changed-to-marginally higher on Monday, with sentiment caught between the after effects of last week's central bank driven rally, importer demand, and a muted tone across Asian peers.
The 1-month non-deliverable forward indicated the rupee will open in the 87.94-87.98 range versus the U.S. dollar, having settled at 87.9750 on Friday.
The RBI's pre-market interventions helped spark a recovery in the rupee from its all-time low on two occasions last week.
That recovery prompted importers to enter, with their dollar demand more noticeable on Friday. The rupee briefly rose to 87.75 before dropping back near 88.00 on importer buying.
"Real flows are limiting the impact of RBI's interventions," a currency trader at a Mumbai-based bank said.
Friday's price action has partially offset the momentum the central bank had created for the rupee, he added.
The rupee was still among Asia’s top performers last week, despite Friday’s fade.
"This week could reveal how much fight the RBI has left," a FX sales person at a private sector bank said.
A break beyond 88 may draw in fresh long-dollar bets and test the central bank’s resolve, he said.
Apart from the RBI, rupee traders are focussing on potential U.S.-India trade deal headlines.
U.S. President Donald Trump reiterated on Sunday that Indian Prime Minister Narendra Modi assured him India would halt Russian oil purchases, warning New Delhi of “massive” tariffs if it failed to comply.
Meanwhile, Asian currencies were mostly flat to kick of the week while the dollar index was marginally weaker.
The ongoing U.S. federal shutdown has halted the release of key macroeconomic data, leaving investors with less clarity on the state of the economy. Consumer inflation data, delayed by the shutdown, is now scheduled for release on Friday.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 88.06; onshore one-month forward premium at 14 paise
** Dollar index down at 98.42
** Brent crude futures down 0.3% at $61.1 per barrel
** Ten-year U.S. note yield at 4.02%
** As per NSDL data, foreign investors bought a net $244.9mln worth of Indian shares on Oct. 16
** NSDL data shows foreign investors bought a net $188.5mln worth of Indian bonds on Oct. 16
