The Indian rupee is set to
open higher on Monday, supported by spillover effects of the
central bank’s recent actions, though persistent oil-related
demand and foreign equity selling could temper sentiment.
The rupee is likely to open in the 92.80-92.90 range
versus the US dollar, having settled at 93.10 on Thursday, per
traders. Indian financial markets were shut on Friday for Good
Friday.
The Indian currency jumped 1.8 per cent last week, its best showing in
over four years, after the Reserve Bank of India imposed
position limits on banks and corporates, curbing the onshore-NDF
arbitrage activity.
This triggered an unwinding of bank positions, leading to dollar
selling in the onshore market. The banks have to bring down
their positions to the RBI-mandated level by April 10.
While a “number” of banks have already cut positions and are
now below the new limits, there are a few that remain, a
currency trader at a bank said.
“That should be a source of support (for rupee) through this
week,” he said.
The central bank followed up with restrictions on speculative
activity by corporates and barred banks from offering NDF to
clients, which bankers said highlighted the central bank’s
intent to back the rupee.
Still, traders say the broader outlook for the rupee remains
weak amid rising oil prices and continued foreign outflows,
particularly from equities.
Oil prices climbed on Monday on continuing fears of supply
losses because of shipping disruptions due to the US-Israeli
war with Iran.
On Sunday, Trump ratcheted up pressure on Tehran, threatening in
an expletive-laden Easter Sunday social media post to target
Iran’s power plants and bridges on Tuesday if the strategic
Strait of Hormuz is not reopened.
Meanwhile, foreign investors continued to shun Indian
equities amid concerns over the economic impact of rising oil
prices, pulling out nearly $1 billion on Thursday after
withdrawing over $12.5 billion in March.