Wed. Sep 20th, 2023
    The Indian Rupee Expected to Open Slightly Higher on Intervention Expectations

    The Indian rupee is anticipated to open slightly higher on Monday, supported by expectations of intervention by the Reserve Bank of India. This is expected to offset concerns over elevated crude oil prices and a widening trade deficit. Non-deliverable forwards suggest that the rupee will open at around 83.10 to the U.S. dollar, slightly stronger than the previous session’s rate of 83.1850.

    According to experts, the Reserve Bank of India’s presence in the market will make it difficult for the dollar to reach its lifetime high against the rupee. Ritesh Bhansali, a director at Mecklai Financial, stated that the central bank’s intervention will limit the upside potential for the dollar.

    Additionally, a foreign exchange trader at a private bank explained that the expected uptick in the rupee’s value at open is likely just a correction following its downward movement on Friday. The trader expects the rupee to trade within a range of 83.10 and 83.25 against the U.S. dollar on Monday.

    The rupee experienced a sell-off toward the end of Friday’s session, which traders attributed to the release of trade deficit data and position adjustments ahead of the weekend. In August, India’s merchandise trade deficit reached $24.16 billion, exceeding the expected $21 billion. IDFC First Bank described the widening trade deficit as a result of increased non-oil and non-gold imports due to robust domestic demand and weak exports driven by external demand weakness.

    Another risk factor for India’s trade deficit is the rising price of oil. Brent crude, which has been trading near year-to-date highs, has increased by 8.5% this month and 26% this quarter.

    This week, investors will closely monitor central bank decisions, starting with the U.S. Federal Reserve on Wednesday, followed by the Bank of England and the Bank of Japan. The focus will be on growth, inflation, and interest rate forecasts.

    Source: Reuters