The Indian rupee is likely to
rise on Wednesday, supported by dollar inflows linked to the Jio
Platforms IPO and by the Reserve Bank of India’s support, though
traders remain wary of oil-price risks that could revive
pressure on the currency.
The rupee is expected to open between 94.75-94.80,
per traders, having settled at 94.9250 to the dollar on Monday.
India’s financial markets were shut for a holiday on Tuesday.
Jio Platforms’ initial public offering opens for
subscription on Wednesday — the issue has already drawn robust
institutional interest. Bids for the anchor portion totalled
more than 30 times the shares on offer.
Foreign investors typically use sell/buy swaps to manage
their dollar flows for IPO allotments, selling dollars for
rupees in the spot market and agreeing to buy them back at a
later date, usually less than a week.
Once shares are allotted, investors can unwind these
positions and sell dollars outright to fund their investments,
leading to dollar supply, traders said.
Apart from the expected IPO-related inflows, the rupee is
likely to draw support from continued dollar sales by the
Reserve Bank of India, which has been intervening around the
95-per-dollar level to boost the currency. The rupee is on a
seven-day winning streak.
“While the currency has momentum, it is finding it
increasingly difficult to break past the 94.70 level,” a
currency trader at a bank said.
Whether IPO-related inflows will provide the impetus for the
rupee to break through that level, which it has repeatedly
struggled with, is the question, he added.
OIL RISKS
Oil remains a key vulnerability for the local currency. Oil
prices rose on Wednesday on Middle East supply concerns, with
traders wary of Red Sea shipping risks and threats to oil
infrastructure in Saudi Arabia.
Brent crude rose 1.5% to $110.34.