By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee strengthened on Monday, snapping a four-day losing streak, but continued to trade in a narrow range due to demand from importers and rising concerns about elevated crude oil prices.
The rupee ended at 82.74 per dollar, gaining 0.12% on the day. The local currency had ended at 82.84 on Friday.
Traders said concerns about elevated crude prices and demand from importers – including oil companies – kept the rupee from strenghting further.
“Anything beyond $83 per barrel on crude oil, and the rupee will be watching closely,” said Sajal Gupta, head of forex and rates at Edelweiss Financial Services.
The rupee is likely to trade in the 82.50-82.80 range over the next few days, Gupta added.
Oil prices have continued to hover around their highest levels seen since mid-April after Saudi Arabia and Russia pledged to extend supply cuts through September.
There is little to no expectation of the rupee weakening above the 83 level this week, a forex trader with a private bank said.
“Overall, oil prices are the biggest tail risk for the rupee market right now,” said Arnob Biswas, head of FX research at SMC Global Securities.
Biswas expects the rupee to be range bound between 82.40 to 82.85 over the next few days, with the tone of the Reserve Bank of India’s (RBI) policy decision on Thursday being a key monitor for its hawkishness.
The central bank is widely expected to hold rates steady.
“We do see one more 25 bps hike in CY23 as CPI inflation is still away from the 4% target,” Bank of America noted in a note.
U.S. consumer price inflation numbers will also be released on Thursday, and a softer-than-expected reading may further curtail chances of another rate hike by the U.S. Federal Reserve.
(Reporting by Jaspreet Kalra; Editing by Varun H K)
