The Indian rupee is
expected to open largely unchanged on Tuesday, with traders
assessing the impact of the central bank’s partial rollback of
FX curbs alongside looming US-Iran risks.
The rupee will open in the 93.08-93.14 range versus
the US dollar, per traders, having weakened 0.2 per cent to 93.1275 on
Monday.
The Reserve Bank of India, after market hours on Monday,
partially rolled back restrictions it had imposed on corporates
and other users and on certain related-party transactions
undertaken by banks.
The RBI withdrew directions barring banks from offering
non-deliverable forwards to resident and non-resident users and
dropped curbs that prevented users from rebooking foreign
exchange derivative contracts.
The restrictions were introduced about three weeks ago,
primarily to prevent corporates from engaging in arbitrage
between onshore and offshore markets. That move, coupled with
prior measures to cap the onshore position size of banks, helped
the rupee recover from a all-time low of 95.21 hit in late
March.
On balance, the RBI’s rollback is likely to put a bit of
pressure on the rupee and push premiums higher at the margin, a
treasury official at a foreign bank said.
“After all that has transpired, it is difficult to gauge how
banks will respond, particularly whether they will allow
corporates to undertake NDF trades,” he said.
US-IRAN TALKS
The rupee and other Asian currencies will have to contend
with uncertainty over whether a second round of US-Iran talks
will take place, with the deadline for the two-week ceasefire
set to lapse this week.
Asian equities were mostly higher on Tuesday, tracking US
equity futures.
“Markets are currently priced for de-escalation,” MUFG Bank
said in a note.
“Any escalation, particularly military action around Hormuz,
could trigger a renewed spike in oil prices and a broad risk-off
move.”