Rupee Near 96 as Oil Prices and Foreign Outflows Weigh

The Indian rupee remained close to the 96 mark against the US dollar in early trading on Monday, facing pressure from high oil prices and foreign fund outflows. Forex traders noted that periodic dollar interventions by the Reserve Bank of India (RBI) helped reduce volatility and prevent sharper declines. Despite these efforts, the overall economic environment, marked by high import costs and a strong dollar, dampened investor sentiment.

At the interbank foreign exchange market, the rupee opened at 96.20 and later dropped to 96.26, marking a 1 paisa decrease from its previous close. On Thursday, the rupee had fallen below the key 96 per dollar level, closing at 96.25. Forex and equity markets were closed on Friday for Mahatma Gandhi Jayanti.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, noted that the rupee closed at its weakest level in over two months and is likely to remain upward biased within the 95.50-96.50 range. This outlook is driven by factors such as oil prices above $100 per barrel, high US yields, and significant foreign portfolio selling. The RBI has been active in defending the rupee, as seen in the $18 billion drop in reserves to $748 billion.

The RBI’s monetary policy committee is set to meet this week, with most economists expecting a 25 basis point increase to 5.50%. Key triggers for the USD/INR pair include US services data, the Fed minutes, the RBI decision on Wednesday, and any confirmation of damage in Saudi Arabia. Brent crude, the global oil benchmark, was trading lower by 0.89% at $101.34 per barrel.

On the domestic equity market, the Sensex rose 413 points to 72,315, while the Nifty gained 131.55 points to 22,554.20. Foreign Institutional Investors (FIIs) sold equities worth Rs 9,484.22 crore on Thursday. India's forex reserves dropped $18.343 billion to $747.557 billion during the week ended September 25.