Key Takeaways
- Indian rupee expected to open between 94.75-94.80 on Wednesday.
- Jio Platforms IPO and RBI interventions likely to support currency.
- Oil-price risks remain a key vulnerability for the local currency.
The Indian rupee is expected to rise on Wednesday, supported by dollar inflows linked to the Jio Platforms IPO and by the Reserve Bank of India’s support, according to market traders.
The rupee is expected to open between 94.75-94.80, per traders, having settled at 94.9250 to the dollar on Monday. India’s financial markets were closed for a holiday on Tuesday.
Jio Platforms’ initial public offering opens for subscription on Wednesday, with the issue already drawing robust institutional interest. Bids for the anchor portion totalled more than 30 times the shares on offer.
Foreign investors typically use sell/buy swaps to manage their dollar flows for IPO allotments, selling dollars for rupees in the spot market and agreeing to buy them back at a later date, usually less than a week.
Once shares are allotted, investors can unwind these positions and sell dollars outright to fund their investments, leading to dollar supply, traders said.
Apart from the expected IPO-related inflows, the rupee is likely to draw support from continued dollar sales by the Reserve Bank of India, which has been intervening around the 95-per-dollar level to boost the currency.
The rupee is on a seven-day winning streak, but momentum is finding it increasingly difficult to break past the 94.70 level, according to a currency trader at a bank.
Whether IPO-related inflows will provide the impetus for the rupee to break through that level, which it has repeatedly struggled with, is the question, he added.
Oil remains a key vulnerability for the local currency. Oil prices rose on Wednesday on Middle East supply concerns, with traders wary of Red Sea shipping risks and threats to oil infrastructure in Saudi Arabia. Brent crude rose 1.5% to $110.34.
