The Indian rupee is seen
opening slightly weaker on Thursday, pressured by equity
outflows and soft Asian cues, while expectation around steps to
support the currency may offer relief.
The rupee is expected to open in 95.74-95.78 range,
per traders, having settled at 95.7050 on Wednesday. After
staging a brief relief rally to the 94.70 level, the currency
has come under renewed pressure.
A pickup in equity outflows and fading hopes of a U.S.-Iran
detente have put the rupee back on the back foot. A prolonged
war in the Middle East is a key risk for net energy importer
India.
Foreign investors pulled nearly $600 million from Indian
equities on Wednesday, per preliminary data, after about $3
billion of outflows in the prior three days.
The pace of June outflows has already nearly matched May’s
total.
The combination of equity outflows and what appears to be
the most serious flare-up since the U.S.-Iran ceasefire
reignited the uptrend in dollar/rupee, a currency trader at a
private sector bank said.
The rupee, however, may be supported by expectations of
measures to bolster the currency amid the fallout from the
U.S.-Iran conflict, the possibility of which has been speculated
over by market participants for several weeks.
India is set to remove capital gains tax on foreign
portfolio investments in government securities to attract
overseas capital, The Economic Times reported on Thursday.
Meanwhile, most Asian currencies weakened and regional
equities slipped. Renewed U.S.-Iran fighting rattled risk
assets, while mixed signals on de-escalation kept investors
wary.
Israel and Lebanon agreeing a ceasefire could potentially
open the door for talks to advance, ING Bank said in a note,
pointing out that Iran has been adamant that any ceasefire with
the U.S. is dependent on a halt in fighting in Lebanon.