Key Takeaways
- Indian rupee closed unchanged at 94.4850 per dollar.
- Reserve Bank of India intervened to sell dollars, supporting the rupee.
- Oil prices near 6-week highs due to concerns over energy flows.
The Indian rupee traded in a narrow range on Monday, closing at 94.4850 per dollar, unchanged from its previous session. This stability was maintained despite rising oil prices, which reached near 6-week highs, due to concerns over energy flows amid strikes on vessels sailing through the Strait of Hormuz.
Bankers noted that the rupee's stability was largely due to consistent dollar sales from state-run banks, most likely orchestrated by the Reserve Bank of India (RBI). These interventions have been a recurring pattern over the past two weeks, with estimates suggesting the RBI sold at least $8 billion last week to bolster the rupee.
The dollar sales have helped the rupee hold its ground, even as oil prices continue to hover near 6-week highs. Brent crude oil futures were last at $96.6 per barrel, with Goldman Sachs predicting they could rise to as much as $120 per barrel if attacks on shipping increase.
Analysts at ING suggested that higher energy prices and limited current market pricing of interest rate hikes by the Federal Reserve could lend some support to the dollar in the near term. Traders have priced in a roughly 57% chance of a Federal Reserve rate hike this month, following stronger-than-expected labour market data.
Market focus now turns to Friday's inflation data, which could provide further insights into the economic landscape. Additionally, Iran announced plans to announce a new restricted zone in the Persian Gulf and a new shipping corridor through the Strait of Hormuz in the coming days, adding to the geopolitical tensions.
Indian stocks fell 0.6% on the day, while MSCI’s gauge of Asian stocks jumped nearly 2%, driven by a rise in stocks linked to the artificial intelligence theme. However, the overall market sentiment remained cautious, with traders closely watching the RBI's interventions and the ongoing geopolitical uncertainties.
The dollar index was down 0.2% to 98.9, while Asian currencies traded mixed. The rupee's stability in the face of these challenges highlights the ongoing efforts by the RBI to manage the currency's value, balancing economic stability with global market pressures.
