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The Indian rupee is expected to open weaker on Friday due to the recent surge in oil prices and the strengthening of the US dollar index. Non-deliverable forwards (NDFs) suggest that the USD/INR pair will likely open at around 83.06-83.08, compared to the previous session’s close of 83.03.

Forex traders are closely watching the central bank’s potential intervention, as both oil prices and the dollar index are putting pressure on the rupee. A forex trader at a bank noted, “The central bank’s resolve to keep the pair from making a record high will be put to the test again in the coming days.”

The Reserve Bank of India had previously intervened when the rupee was at risk of falling below the record low of 83.29, both in the NDF and the onshore over-the-counter markets.

Brent crude futures reached a year-to-date high near $94.30 per barrel due to supply concerns and China’s move to cut banks’ cash reserve requirements to boost its economic recovery. Local oil companies have been actively buying dollars, and this demand is expected to persist throughout the month, adding to the rupee’s pressure.

The US dollar index rose to a six-month high of 105.43, supported by better-than-expected US economic data. ING bank noted, “The US economy is still refusing to roll over,” following data that showed a 0.6% rise in US retail sales in August, exceeding expectations.

The euro’s decline after the European Central Bank signaled the end of its rate hike cycle contributed to the dollar index’s rally. While most Asian currencies weakened, the offshore Chinese yuan saw gains following economic data indicating potential stabilization of the Chinese economy.

Key Factors:

  • One-month non-deliverable rupee forward at 83.14; onshore one-month forward premium at 10 paisa.
  • USD/INR NSE September futures settled at 83.0550 on Thursday.
  • USD/INR September forward premium at 3 paisa.
  • Dollar index (DXY) at 105.31.
  • Brent crude futures up 0.6% at $94.2 per barrel.
  • Ten-year US note yield at 4.28%.
  • Foreign investors sold a net $276.4 million worth of Indian shares on September 13, as per NSDL data.
  • NSDL data shows foreign investors bought a net $115.9 million worth of Indian bonds on September 13.