Indian Rupee Set to Open Higher as Oil Slides to 5-Month Low; RBI policy under scrutiny – Reuters

A man counts Indian banknotes at a store in Mumbai, India, August 13, 2018. REUTERS/Francis Mascarenhas

MUMBAI, Aug 5 (Reuters) – The Indian rupee is expected to strengthen against the U.S. dollar at the open on Friday as oil prices extended their recent decline to fall to their lowest level since February.

The policy decision of the Reserve Bank of India (RBI) will determine the intraday direction of the rupee, traders said.

The Rupee will likely open at 79.15-79.20 per dollar, down from 79.47 in the previous session.

Brent crude fell 2.8% on Thursday, taking its losses this month to more than 14%. Oil prices came under pressure on demand concerns, pushing Brent to its lowest level since before Russia invaded Ukraine in February.

“The ongoing correction in oil prices will be a major relief for the rupiah. Especially at this time when trade deficit concerns are high,” said a private sector bank trader.

“Oil will help the Rupee open higher and from there it all depends on what the RBI does.”

The Indian central bank is expected to raise its key interest rate. Economists polled by Reuters expect the rise to be between 25 basis points and 50 basis points.

Traders believe a smaller rate hike will put the rupiah under pressure given recent hawkish rhetoric from US Federal Reserve officials.

Asian currencies were mostly higher on Friday, following the dollar index’s decline below 106. The monthly US jobs report due Friday will be watched closely to gauge developments in the market. US labor and to gauge the outlook for the pace of the Fed’s future rate. hikes.

KEY INDICATORS:

* Non-deliverable rupee one-month forward at 79.36; one-month onshore futures premium at 20.06 paisa

* USD/INR NSE August futures closed at 79.54 on Thursday; August OTC premium at 14.5 paisa

* Dollar index up at 105.85 after slipping 0.8% in the previous session

* Brent crude futures up 0.4% at $94.5 a barrel after falling 2.8% on Thursday

* US 10-year bond yield at 2.69%, Indian 10-year bond yield at 7.16%

* Nearest month SGX Nifty futures up 0.3% to 17,455

* Foreign investors bought Rs 14.8 billion net worth of Indian stocks on August 3, according to BSE data

Reporting by Nimesh Vora; Editing by Shounak Dasgupta

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