The Indian rupee was flat on Friday, as central bank intervention continued to anchor the currency even as rising crude oil prices and persistent dollar demand from importers looking to hedge their foreign currency exposure exerted pressure.
The Reserve Bank of India's ongoing intervention -- a daily feature over the last two weeks -- has limited the currency's weakness and helped park it near the 95.70 per dollar mark on Friday, little changed on the day. The currency is on course for a 0.3% week-on-week decline.
Steps taken by the U.S. Treasury to lower long-end yields have weakened the dollar, working in the RBI's favour. That's after a hawkish tilt in the central bank's monetary policy meeting minutes had a muted impact, despite raising expectations of rate hikes ahead.
"The softer dollar may offer some relief, but elevated crude prices and ongoing geopolitical risks continue to keep the pressure on the rupee," said Amit Pabari, managing director at FX advisory firm CR Forex.
The INR is expected to gradually move towards 96.20–96.50, while any upticks are likely to remain short-lived, he said.
The 1-year overnight index swap rate, a gauge of future rate expectations, has risen 20 bps this week and last stood at 5.93%, showing that markets are pricing about 70 bps of hikes over the next 12 months.
Meanwhile, Asian currencies were up between 0.1% to 0.8% on Friday, led by a sharp rally in the Korean won. The dollar index hovered at 98.7, on course for a near 1% weekly drop.
Brent crude oil prices were at $93.5 per barrel, on track for a second weekly rise as a stalemate in the U.S.-Iran war continues to disrupt supply from the key Middle East producing region.
