Indian rupee set for muted open as oil, IPO flows shape direction
India's currency is set for a subdued start on Monday as traders track crude oil prices and expected foreign portfolio inflows for near-term direction. Expectations that the Reserve Bank of India will act to limit sharp weakness are also keeping the rupee within a narrow trading view.
Highlights
- The rupee is projected to open slightly weaker in the 95.90-95.95 range versus Friday’s 95.8725 close as oil prices remain above $100 per barrel.
- Goldman Sachs expects sustained elevated oil prices to pressure India's current account but sees USD/INR contained within the 95-97 range due to improved capital flows and RBI tools.
- India's FX reserves at about $781 billion and robust foreign demand for the National Stock Exchange of India's $2.3 billion IPO provide key support for the rupee.
Opening range and key market drivers
As reported by Reuters, traders expect the rupee to open in the 95.90-95.95 band, slightly weaker than Friday's close of 95.8725.Crude prices ease on Monday but remain above $100 a barrel as Iran and the U.S. exchange new threats and investors assess the recovery in Saudi Arabian energy shipments. Brent is down 2% at $101.7 per barrel, while hopes for a diplomatic solution to the Iran war during this week's UN meeting also help cool prices.
Goldman Sachs says elevated oil prices may keep India's current account under pressure, but improved capital flow dynamics should keep USD/INR within the 95-97 range. The bank adds that even if the broader U.S. dollar rebounds, the RBI has shown it has enough tools to cap gains in USD/INR.
IPO-linked inflows and RBI support
The central bank's capital inflow measures, including incentives for raising overseas foreign exchange deposits and borrowings, help lift India's FX reserves to about $781 billion. That gives the RBI more room to fund the current account gap and limit rupee depreciation.Traders also say expected foreign portfolio flows tied to a large domestic IPO may support the rupee on Monday. The National Stock Exchange of India's $2.3 billion IPO is fully subscribed on Friday, and analysts expect demand, particularly from foreign institutional investors, to continue on Monday.
Across the region, currencies are mostly range-bound while share markets edge higher as strong AI-driven demand for data supports chipmakers. Futures, however, point to a quiet start for equities in Mumbai.
In our earlier article on the Indian rupee and bond markets, we noted that USD/INR was expected to stay in a tight range as portfolio inflows and RBI intervention offset pressure from elevated oil prices and importer demand. We also highlighted rising bond yields amid the RBI’s liquidity-draining bond sales and growing expectations of a possible rate hike later in the year.
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