MUMBAI, – The Indian rupee is likely to open weaker on Tuesday, tracking losses in Asian peers, with traders noting that underlying flows are compounding pressure and limiting near-term upside.
The rupee (INR=IN) is expected to open in the 94.60-94.62 range, per traders, after declining 0.2% to 94.54 on Monday.
The currency, which had recovered to near the 94 level from an all-time low of around 97 hit mid-last month due to a drop in oil prices and steps by the central bank to support it, has largely traded in a range in recent sessions.
It has repeatedly struggled to move past the 94.00-94.20 region despite attempts driven by the unwinding of short rupee positions. The recent strength in the dollar has capped its upside, while bankers point to persistent importer hedging following the rupee’s recovery and tepid equity flows.
On Monday, the rupee touched an intraday high of 94.25 before retreating.
For now, the strategy is to buy dollar/rupee around 94.20-94.30 for a 30-40 paisa move, and sell in the 94.70-94.90 zone, where the Reserve Bank of India appears to be defending, a currency trader at a private bank said.
Oil prices continue to support the rupee, with Brent crude holding near levels seen before the Iran conflict in late February. While oil has pulled back to pre-war levels, the rupee remains weaker than levels around 91 seen before the conflict.
Brent crude slipped to about $72.50 on Tuesday, with investors focused on the prospect of Iran-U.S. talks in Doha.
Meanwhile, the dollar index inched up to 101.26. Among Asian currencies, the Indonesian rupiah led losses, while the Japanese yen hovered near a 40-year low against the dollar.
Expectations of Federal Reserve rate hikes later this year have supported the dollar. The Fed’s latest meeting was viewed as hawkish by analysts, prompting a repricing of rate hike expectations.
(Reporting by Nimesh Vora; Editing by Rashmi Aich)
