Risk aversion compounding oil-driven pressure on Indian rupee, RBI in focus

MUMBAI: The Indian rupee is likely to extend its decline at Friday’s open, with a deteriorating risk appetite adding to headwinds from rising crude ​oil prices. The Indian rupee is expected to open in the 96. 40-96. 44 range ‌to the US dollar, per traders, having settled at 96. 3450 on Thursday. The currency is on a four-session losing streak, during which it has slipped past levels that many market participants had ​expected to provide significant resistance. The currency now sits less than 0. 5% ​away from its record low of 96. 96 per US dollar, hit ⁠in May. While the Reserve Bank of India has been intervening almost daily in ​both the spot and non-deliverable forward markets to support the currency, traders said the ​scale of intervention has been relatively measured considering the intensity of the pressure on the rupee. The currency has come under pressure despite a turnaround in portfolio flows, particularly on the equity ​side. Foreign investors have purchased about $1. 5 billion worth of Indian equities so far ​this month, marking a major reversal from the more than $5 billion of outflows recorded in June. Foreign ‌flows ⁠into debt have also remained positive, with overseas investors investing roughly $500 million so far this month, adding to the more than $3 billion that flowed into Indian debt in June. “You have to think it is the usual importer demand and exporter-related flows” ​that are weighing on ​the rupee, a ⁠currency trader at a bank said. There have been a few “chunky” outflows too, and the RBI has not shown intent to ​defend a particular level aggressively, he added. Risk aversion, oil Asian equities ​fell and ⁠U. S. equity futures extended losses, while Brent crude hovered near $85 a barrel after rallying about 12% this week due to escalating hostilities in the Middle East. The United States ⁠and Iran ​have stepped up attacks across the Gulf region, ​with the collapse of their ceasefire raising concerns about disruptions to oil flows through the Strait of ​Hormuz, a critical artery for crude supplies.

Read full story on Business Recorder