Rupee to hold its rise past 96; RBI, soft oil counter dollar strength

By Nimesh Vora

MUMBAI, July 28 (Reuters) – Indian rupee expected to remain above 96 per dollar at Tuesday’s open; Recent central bank intervention and softening oil prices oppose the dollar’s overall strength.

According to traders, the rupee is expected to open with a sideways rise after gaining 0.7% in the previous session to settle at 95.91 per US dollar.

The currency has rebounded after moving towards the 97 per dollar level for the first time at Friday’s open.

The reversal was due to the decline in crude oil prices as well as the intervention of the Reserve Bank of India to defend the 97 level.

The RBI stepped up its intervention with additional dollar sales on Monday, triggering stop losses on long dollar positions and accelerating the rupee’s rise.

The Indian currency hit a two-week high on Monday, recording its biggest single-day rise in nearly six weeks.

A trader at a private sector bank said the drop in oil prices alone would not be enough to reverse sentiment towards the rupee.

The key factor was the intervention of the RBI, which was quite persistent. This intervention will keep speculators cautious for at least the next few days, the official added.

Optimistic Dollar

The dollar gained against most Asian currencies, with the dollar index hovering near a one-month high.

Expectations that the Fed could still raise interest rates with Wednesday’s policy decision have supported the US currency, but markets remain largely positioned for rates to remain unchanged.

Traders currently price the odds of a rate hike at roughly one in three, according to the CME FedWatch Tool.

OIL CONTINUES ITS DECLINE

Oil prices fell 1 percent as market participants weighed a pause in U.S. attacks on Iran, raising hopes for a diplomatic solution to the conflict. Brent crude fell 1.5% to $87.06 per barrel, contributing to the 8.7% decline in the previous session.

(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)