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Surging oil prices, dollar to test RBI resolve on rupee
15 Sep, 2023 / 09:54 am / OMNES Media LLC

Source: http://www.reuters.com

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MUMBAI (Reuters) - The Indian rupee is likely to open weaker on Friday after oil prices and the dollar index climbed to multi-month highs, possibly leading the central bank to intervene.

Non-deliverable forwards (NDFs) indicate rupee will open at around 83.06-83.08 to the U.S. dollar compared with the close of 83.03 in the previous session.

"Considering oil and dollar, we definitely would have been much higher (on USD/INR) if the central bank was not a factor," a forex trader at a bank said,

"The central bank's resolve to keep the pair from making a record high will be put to the test again in the coming days."

The last time the rupee was at risk of falling below the record low of 83.29, the Reserve Bank of India intervened, both in the NDF and the onshore over-the-counter markets.

Brent crude futures spiked to a fresh year-to-date high on Friday to near $94.30 per barrel on supply worries and after China moved to cut banks' cash reserve requirements to boost its economic recovery.

Local oil companies have been actively buying dollars through the week and the demand is likely to continue all through this month, a foreign exchange trader at a state-run bank said, signalling persistent pressure on the rupee.

The dollar index rose to a 6-month high of 105.43 on Thursday following better-than-expected U.S. economic data.

"The US economy is still refusing to roll over," ING bank said in a note after data showed that U.S. retail sales rose 0.6% in August, more than the expected 0.2%.

The euro's slide after the European Central Bank signalled it was likely done with its rate hike cycle contributed to the dollar index's rally.

Most Asian currencies were down but the offshore Chinese yuan rose after economic data suggested that recent support measures may be starting to stabilise the Chinese economy.

KEY FACTORS:

** One-month non-deliverable rupee forward at 83.14; onshore one-month forward premium at 10 paisa ** USD/INR NSE September futures settled at 83.0550 on Thursday ** USD/INR September forward premium at 3 paisa ** Dollar index at 105.31

** Brent crude futures up 0.6% at $94.2 per barrel

** Ten-year U.S. note yield at 4.28%

** As per NSDL data, foreign investors sold a net $276.4mln worth of Indian shares on Sep. 13 ** NSDL data shows foreign investors bought a net $115.9mln worth of Indian bonds on Sep. 13