The Indian rupee remained under pressure against the US dollar in early trade on Monday, slipping to 96.26 amid elevated crude oil prices and continued foreign investor selling.
The rupee opened at 96.20 at the interbank foreign exchange market before weakening to 96.26, down one paisa from its previous close of 96.25. Forex and equity markets had remained closed on Friday for Gandhi Jayanti.
RBI intervention limits losses
Forex traders said dollar sales by the Reserve Bank of India helped contain the rupee's decline. However, higher import costs, elevated crude prices and a stronger US dollar continued to weigh on sentiment.
Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, expects the dollar-rupee pair to trade in the 95.50-96.50 range, with a bias towards a stronger dollar. He cited crude oil prices above $100 a barrel, elevated US bond yields and heavy foreign portfolio selling as key risks for the rupee.
RBI policy decision in focus
Market participants are closely watching the RBI's monetary policy decision scheduled for Wednesday. Banerjee said most economists expect the central bank to raise its policy rate by 25 basis points to 5.50%.
Investors will also track US services data and minutes of the Federal Reserve's meeting for further cues on global interest rates and currency movements.
Banerjee said any confirmation of damage to Saudi infrastructure could push Brent crude prices higher. Expectations of an October Federal Reserve pause and an RBI rate hike, however, are already reflected in market prices, he added.
Dollar, foreign outflows keep pressure on rupee
The dollar index rose 0.54% to 102.47, while Brent crude futures eased 0.89% to $101.34 a barrel.
Foreign institutional investors sold Indian equities worth ₹9,484.22 crore on Thursday. Despite the continued foreign outflows, domestic equity markets opened higher, with the Sensex gaining 413 points and the Nifty rising 131.55 points in early trade.
Forex reserves decline
India's foreign exchange reserves also declined sharply. RBI data showed reserves fell by $18.343 billion to $747.557 billion in the week ended September 25, following a $14.881 billion decline in the previous week.
With crude oil prices remaining elevated, foreign portfolio outflows continuing and the dollar staying firm, market participants are expected to closely watch RBI intervention and global cues for the rupee's next move.
