MUMBAI, Aug 3 (Reuters) – The Indian rupee’s recent recovery is set to continue on Monday, with a drop in crude oil prices reinforcing the positive momentum created by repeated RBI intervention.
The currency is expected to open in the 95.25 to 95.30 range, traders said, after settling at 95.38 per U.S. dollar on Friday.
The rupee rallied 1.2% last week, aided largely by the Reserve Bank of India’s near-daily intervention through dollar sales across multiple levels, per bankers.
The combination of RBI intervention and falling oil prices has shifted the narrative for the rupee from fears of a slide beyond 97 per dollar to expectations that the currency has found a floor.
OIL TAILWIND
Brent crude for October delivery fell 4.7% to below $84 a barrel after U.S. President Donald Trump said plans for an attack on Iran had been shelved to allow time for negotiations on a nuclear deal.
The question for the rupee and broader financial markets is whether this optimism will persist and whether the developments ultimately translate into tangible progress, traders said.
The RBI has built “significant” positive momentum for the rupee, and with support from lower oil prices, the recovery may have further room to run, a currency trader at a bank said.
The scale of the recovery has already surprised markets, he added.
INFLOWS UPDATE
Measures announced by the RBI to attract capital inflows and support the rupee have brought in about $41 billion, according to data released on Saturday. Of this, $36.7 billion came through foreign currency non-resident deposits.
Markets are closely tracking these figures given that higher inflows provide the RBI with more firepower to support the rupee.
Meanwhile, the RBI’s net foreign exchange forward book shrank slightly to $103.3 billion in June, thanks to a reduction in near-tenor dollar liabilities.
