Rupee's modest gains face pressure from high oil prices and waning IPO inflows
The Indian rupee opened slightly stronger but remains vulnerable to a drop past the 95 per dollar level as oil prices stay high and foreign fund support from the Jio Platforms IPO is expected to fade.
The Indian rupee opened marginally stronger on Monday, trading at 94.93 per U.S. dollar, up a single paisa from Friday's close of 94.94. Analysts note that the currency is still close to the psychologically important 95-per-dollar threshold.
Last week the rupee moved between 94.32 and 94.97, buoyed by foreign institutional inflows linked to the Jio Platforms initial public offering and by the unwinding of currency positions. Those inflows are expected to taper off as the IPO allotment process concludes, ahead of the company's stock market debut on Wednesday.
"Last week's supportive flows are unlikely to recur," said a currency trader at a private-sector bank, referring to the foreign fund activity tied to the IPO.
Elevated crude-oil prices present a further headwind. Brent crude hovered near $115 a barrel, a six-month high, after supply-disruption concerns following attacks in Saudi Arabia. Higher oil import costs could widen India's trade deficit and add pressure on the rupee, while also prompting businesses to hedge currency risk.
The Reserve Bank of India’s intervention remains a key factor in the near-term direction of the rupee. Investors will also watch the U.S. Federal Reserve’s policy decision later this week, with markets expecting rates to stay unchanged but seeking clues on future moves that could affect the dollar and emerging-market capital flows.