MUMBAI, Oct 5 (Reuters) – The Indian rupee is expected to see some respite on Monday, with softer oil prices and further paring of bets on an October Federal Reserve rate hike easing pressure on the currency.
The rupee is expected to open in the 96.22-96.26 range, per traders, having settled at 96.3150 to the dollar on Thursday. Indian financial markets were shut on Friday for a holiday.
The rupee has been under sustained pressure, convincingly slipping past the 96-per-dollar level to a fresh two-month low. A surge in US Treasury yields, which has boosted the dollar, and persistent pressure from high oil prices have been the main headwinds for the currency.
The Reserve Bank of India has remained a steady presence in the market, helping slow the rupee’s decline. However, with the 96-per-dollar level, closely watched by markets, now decisively breached, traders see a higher scope for the currency to weaken further.
The rupee’s slight opening is likely more a reflection of expectations that the RBI will step in, a currency trader at a private sector bank said.
However, with 96 now decisively breached, the odds of further rupee weakness have increased, he added.
FED RATE HIKE ODDS FALL
The probability of a Fed rate hike at this month’s meeting has fallen to around 20% after the US economy added fewer jobs than expected.While investors initially responded by buying Treasuries, that move later reversed, underscoring the inflation forces weighing on US bond markets.
“Investors appeared reluctant to extrapolate a single soft employment print while inflation risks remained high,” Morgan Stanley said in a note.
That suggests any relief for the rupee from the sharp repricing of Fed expectations could prove fleeting, traders said.
Meanwhile, oil prices slipped on Monday as rising crude exports from the Middle East and oil stock releases by Group of Seven nations eased supply concerns.
Reporting by Nimesh Vora; Editing by Rashmi Aich
