Rupee flat at 94.47 against the dollar; Jio IPO flows support outlook but crude remains a risk

“With Jio-related flows continuing, the rupee could strengthen further despite a stable dollar index and crude prices,” a forex trader at a private bank said. “Exporters will continue to sell on upticks, while importers are buying on dips but largely for their near-term requirements.” The dollar index was flat at around 101.65–101.70 during early Asian trade. Earlier weakness reflected lower US Treasury yields and improved risk sentiment, while West Asian tensions continued to provide some support to the greenback.

Crude oil and month-end demand in focus Brent crude futures rose to around $110.32 a barrel after settling at $108.82 the previous day amid renewed concerns over West Asian supplies and shipping disruptions. India's crude oil basket stood at $115.55 a barrel on October 20, with its premium easing slightly. Sustained high oil prices pose a risk to the rupee by raising India's import bill and adding to pressure on the current account and imported inflation.

Traders also expect dollar outflows after the Jio IPO subscription and allotment process is completed. Month-end payment demand and the US Federal Open Market Committee's rate decision could add to volatility and offset some of the support from equity-related inflows. Elevated forward premiums are discouraging importers from locking in dollar requirements over longer tenures, traders said. Many are instead buying dollars to meet near-term needs, keeping longer-term hedging demand subdued.

Exporters are expected to sell dollars when the rupee weakens, while importers are likely to buy on dips for immediate requirements. The balance between continued IPO-related inflows, oil-related dollar demand and month-end payments will determine whether the rupee can extend its gains. Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.