By Nimesh Vora
MUMBAI, Sept 15 – The Indian rupee is poised to decline at Tuesday’s open, weighed down by the same sticking points seen in recent sessions, a persistent oil rally fuelling inflation worries and lifting U.S. yields.
The rupee is expected to open near 95.80 to the U.S. dollar, per traders, having settled at 95.55 to the dollar on Friday. Indian financial markets were shut on Monday for a public holiday.
The 95.80-per-dollar level is seen a key near-term support for the rupee, with the Reserve Bank of India repeatedly stepping in to defend the currency around that level.
The central bank was seen selling dollars near 95.80 on Friday, while similar intervention was reported in mid-August when the RBI repeatedly kept the currency from weakening beyond the 95.80 mark.
A break below the 95.80 handle would weaken the rupee’s near-term technical setup, potentially triggering a fresh bout of dollar buying, with 96 emerging the next psychological marker, a currency trader at a bank said.
A sustained breach of 96 could then expose the currency to a deeper leg of depreciation, he said.
NO LET UP ON OIL
The rally in oil showed no signs of pausing amid a stalemate between the U.S. and Iran that has kept the Strait of Hormuz largely shut.
The pressure has been compounded by fresh attacks by Iran-backed Houthi forces in Yemen on Saudi Arabia, which has blocked a pipeline that allows the kingdom to bypass the Strait of Hormuz.
Fresh Houthi attacks on Saudi Arabia on Monday and stalled Gulf-Iran talks heightened fears of a wider conflict and more supply disruptions.
Brent crude rose more than 1% in Asian trading to $107.20 a barrel, taking its rally this month to more than 18%. It hit near $110 on Monday. [O/R]
The surge in oil prices is fanning inflation concerns and pushing U.S. Treasury yields higher, with the 10-year yield hitting 5% for the first time in nearly three years.
The jump in oil has driven a repricing of the rates outlook, with markets now assigning near certainty to a Federal Reserve rate hike on Wednesday.
(Reporting by Nimesh Vora; Editing by Rashmi Aich)
