MUMBAI, July 7 (Reuters) – The Indian rupee is likely to open higher on Tuesday, supported by the rise in most Asian currencies, though traders say the currency’s underlying bias has weakened markedly in recent sessions.
The rupee is expected to open in the 95.34-95.38 range, according to traders, having settled at 95.3950 in the previous session.
The currency has lost more than 1% over the last six sessions and, in Monday’s session, slipped near the 95.50 level for the first time in a month.
The rupee’s recovery toward the 94-per-dollar level, helped by the decline in oil prices and steps taken by the Reserve Bank of India to draw in dollar flows, appears to have run its course, with the currency back on the defensive, traders said.
Routine dollar demand from importers, expectations that the Federal Reserve could still raise rates later this year, and arbitrage-related flows have weighed on the rupee.
The dollar index, which had rallied on the back of Federal Reserve rate-hike expectations, has cooled following a softer-than-expected U.S. June jobs report.
That, however, has offered little relief to the rupee, a development that traders say is concerning.
“Normally, a softer dollar is exactly what the rupee needs to catch its breath. This time, it simply did not happen, and that is the part worth watching closely,” Mumbai-based CR Forex said in a note.
The rupee will likely look to RBI support to help stem depreciation pressures. The central bank has been selling dollars at various levels and may have intervened through state-run banks near the 95.50 level in Monday’s session.
ASIA RELIEF
Most Asian currencies traded higher on Tuesday, while the dollar index was largely range-bound, hovering just below the 101 level.
Investors are keeping an eye on the release of the minutes from the Federal Reserve’s June 16-17 meeting on Wednesday for further clues on the U.S. interest-rate outlook.
Reporting by Nimesh Vora; Editing by Janane Venkatraman.
