Rupee to rely on RBI’s intervention amid surging oil prices

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee will be pressured by the jump in oil prices over the Middle East conflict and may again have to count on the central bank’s assistance, traders said.

Non-deliverable forwards (NDFs) indicate rupee will open at around 83.25-83.26 to the U.S. dollar, barely changed from the previous session.

Brent crude was at $90.88 in Asia after soaring nearly 6% on Friday – its biggest advance since April – on Israeli military beginning the first ground raids into the Gaza Strip. U.S. equities declined on Friday when the dollar index edged up while safe-haven demand pushed U.S. Treasury yields down.

“Recent price action in oil suggests that the market remains nervous over the ongoing conflict,” ING Bank said in a note.

It pointed to the recent warning by Iran of the conflict escalating to a wider swathe and to reports that Saudi Arabia has frozen talks to normalize relations with Israel.

Asian currencies and equities were down to kick off the week.

“Rupee will have to deal with a host of negative cues – oil, how Asia is doing and the poor risk,” a spot foreign exchange trader at a bank said.

“But its has one big factor in its favour – the RBI (Reserve Bank of India).”

The RBI has been regularly intervening in the spot over-the-counter and on NDFs to prevent the rupee from weakening below the 83.29 record low.

The one-month USD/INR pair had climbed to 83.50 in New York trading on Friday, but has since pulled back.

The focus for the rupee and other Asian currencies this week will be on the U.S. data and comments by Federal Reserve officials. Investors will parse the data and comments to assess the chances of one more Fed rate hike this year.

U.S. retail sales, industrial output and housing data are due this week.

KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.36; onshore one-month forward premium at 9.25 paisa ** USD/INR NSE October futures settled on Friday at 83.32 ** USD/INR October forward premium is at 3.5 paisa ** Dollar index at 106.52 ** Brent crude futures up 0.1% at $91 per barrel ** Ten-year U.S. note yield at 4.65% ** As per NSDL data, foreign investors sold a net $210 mln worth of Indian shares on Oct. 12

** NSDL data shows foreign investors bought a net $104.4 mln worth of Indian bonds on Oct. 12

(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)