Indian rupee faces pressure from oil headwinds, lack of inflow support

Mumbai: The Indian rupee faces pressure at the opening bell on Monday, potentially falling below the psychological level of 95, according to traders. This decline is attributed to a combination of an oil price overhang and the absence of inflows seen last week. Analysts predict the rupee will open in the 95.00-95.04 range, following its settlement at 94.94 per dollar on Friday.

Last week, the currency fluctuated between 94.32 and 94.97, moving towards the stronger end of its range due to inflows from the Jio Platforms IPO and position unwinding. However, these flows are not anticipated to reoccur, and the looming oil price continues to cast a shadow on the rupee's performance. A currency trader at a private sector bank notes that dollar demand from oil refiners is currently not a direct factor for the rupee, as the Reserve Bank of India's special window allows them to meet foreign-exchange requirements outside the normal market.

The looming threat of Brent crude nearing $115 a barrel, however, remains a significant macro concern for the rupee, exacerbating its external outlook and dampening foreign portfolio flows. Analysts also emphasize that the Federal Reserve's policy decision will be a focal point this week, with markets keenly awaiting clues on the rate outlook, especially whether another hike could occur in December.