(Updates post market open)
By Jaspreet Kalra
MUMBAI, – The Indian rupee‘s recovery from near-record lows met with hurdles on Thursday, with traders watching for RBI dollar purchases and a return of oil refiners to the spot market.
The rupee, which has outperformed its Asian peers in November, struggled to breach 94.50-94.60 despite a more than 1% drop in oil prices and sustained foreign equity buying.
It was at little changed on the day at 93.6775 per dollar as of 11:00 a.m. IST.
Foreign equity inflows this month are set to exceed $7.5 billion, more than reversing the previous two months’ outflows.
The rupee has also benefited from a slide in oil prices amid optimism over an end to the Iran war, while concerns over crowded AI-linked positions have weighed on other Asian markets.
Four traders cited strong dollar demand from state-run banks near the rupee’s recent highs over the past two sessions, fuelling speculation that further gains could prompt RBI dollar purchases and a return of oil-linked demand to the market.
Last month the central bank had opened a dedicated dollar supply window for state-run oil refiners – alongside other measures to curb dollar demand – as the rupee threatened to breach record lows.
With the currency having since recovered, traders reckon that the central bank may use the opportunity to slow the drain on foreign exchange reserves on account of the oil refiner demand and also look to replenish the kitty which has dipped to an about 3-month low of $717 billion.
RATE HIKE WATCH
Traders will also watch India’s October inflation data due on Thursday, with headline inflation expected to approach the central bank’s 6% upper tolerance limit.
“The composition will matter as much as the headline: evidence that food-price pressures are spilling into underlying inflation would reinforce expectations for further RBI tightening and might provide additional near-term support for INR,” MUFG said in a note.
(Reporting by Jaspreet Kalra; Editing by Janane Venkatraman and Nivedita Bhattacharjee)
