The rupee opened 10 paise higher at ₹94.39 against the US dollar on Monday, September 7, as the Reserve Bank of India’s recent intervention is expected to cushion the impact of elevated crude oil prices and growing expectations of a US Federal Reserve rate hike next week.
The Indian currency gained nearly 1% last week, easing some of the bearish sentiment in the market. Traders cited by Reuters said the RBI’s sustained presence in the foreign exchange market has helped limit pressure on the rupee from rising oil prices and a more hawkish outlook on US monetary policy.
As per Reuters report, a currency trader at a bank said the Reserve Bank of India (RBI) has changed the tone around the rupee, with market participants now watching whether the central bank maintains its active intervention and provides enough support for the currency to sustain or extend its recent gains.
The rupee is likely to remain dependent on RBI support at the start of the week, as crude oil prices continue their upward move and stronger-than-expected US jobs data has increased expectations of a Federal Reserve rate hike at its September 15-16 meeting.
Heightening concerns over a prolonged disruption to Middle East oil supplies, tit-for-tat strikes between the US and Iran targeting vessels in and around the Strait of Hormuz pushed Brent crude prices to around $97 a barrel.
Meanwhile, US nonfarm payrolls rose by 162,000 last month, significantly exceeding economists’ expectations of a 56,000 increase. The labour market picture was also revised stronger for July, with an earlier reported decline of 23,000 jobs replaced by an increase of 21,000.
(more to come)