Rupee faces test, RBI support remains centre stage after challenging week
The Indian rupee is set for another test on Monday, with traders keeping a close watch on the Reserve Bank of India's presence, following a challenging week marked by persistent dollar demand and thin supply.
The 1-month non-deliverable forward indicated the rupee will open marginally-higher-to-flat. It fell 0.4% last week to slip past the 90-level and settled near the week's high of 90.1975.
The move past 90 unfolded despite likely intervention by the RBI to support the rupee, highlighting the strength of underlying demand, per bankers.
Corporate dollar buying remained heavy, while hedging interest by exporters was largely absent, allowing pressure to build, they said.
The rupee has now wiped nearly half of the intervention-led rally from 91 to near 89.25, reinforcing the view the local currency will be under strain until there is a U.S.-India trade deal.
"Once you are past 90, RBI becomes a more meaningful player," a currency trader said.
"Anyone long (on USD/INR pair) has to price in the risk of being stopped put by intervention. When it comes to real flows, the RBI's impact is less."
Asian cues were largely unsupportive of the rupee, with its peers mostly weaker and dollar index inching up.
Investors are assessing the fallout from a dramatic weekend that saw the U.S. capture Venezuelan President Nicolás Maduro. U.S. President Donald Trump said Washington could launch a second military strike on Venezuela if remaining members of the administration fail to cooperate with efforts to "fix" the country.
Meanwhile, investors will be eyeing a slate of U.S. macroeconomic indicators due this week that could be crucial in steering Federal Reserve policy.
