Dollar demand, FPI outflows, oil prices to weigh on rupee

Persistent dollar demand, a swelling oil import bill and steady foreign portfolio outflows continue to weigh on the currency despite RBI’s efforts to curb speculative activity and limit market participation by oil companies.

The rupee is expected to open with a gap on Monday at 94.40-94.50, weaker from its previous close of 94.25/$.

“Over the past few days, we see RBI tolerating weaker levels. On Friday, it intervened at 94.30/$; before that we saw intervention at 94.15/$. And I expect this tolerance for weaker levels to increase, as sentiments are negative amid prolonged peace talks,” said Anil Bhansali, head of treasury, Finrex Treasury Advisors.

He expects the rupee to open at 94.35, and trade within a range of 94 to 94.50 on Monday, with RBI likely stepping in at 94.50/$.

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Traders expect crude oil prices to climb back above the $100-a-barrel mark, after briefly dipping below that level on Friday. The decline, seen around 4pm IST, was driven by market speculation that Iran’s foreign minister was expected to arrive in Islamabad with a small delegation for potential peace talks with the US.
However, with no such development materialising, market participants now expect geopolitical risk premiums to add pressure on oil prices.“Peace talks aren’t happening and there are conflicting comments between Iran and the US. This creates uncertainty, and hence, I expect the crude price — which was briefly below $100 per barrel — to again increase. This should cause the rupee to open weaker at around 94.40/$ levels,” said Ritesh Bhansali, deputy CEO, Mecklai Financial Services.