Rupee opens 3 paise higher at 94.46 against dollar on continued FCNR-B tailwinds

Reports coming in for today mention that The indian rupee opened three paise elevated on September 4, basking in the afterglow of hefty inflows brought by the Reserve Bank of India’s special schemes, though traders at large stayed wary due to rising Brent crude prices and US-Iran uncertainty.

The currency was trading at 94.46 a dollar after ending the previous day at 94.49, gaining 0.5 percent and taking its surge for the ​week to a percentage point.

Sentiment for the indian rupee has been bolstered after the RBI announced that the special concessional swap window for foreign currency non-resident bank (FCNR-B) deposits, among others, garnered nearly $136 billion, resulting in excess liquidity in the banking system.

Asia's second-best performing currency after the Korean ​won the current week, the indian rupee has managed to climb to ⁠its highest level in two months despite a surge in crude prices ​that has pushed up US Treasury yields and increased expectations that the Federal ​Reserve will raise rates this month.

The combined force of outsized inflows and the ‌RBI ⁠now showing willingness to use its expanded firepower more aggressively has the potential to change near-term perceptions of the indian rupee’s outlook, a currency trader at a bank told Reuters.

"That stated, oil can be a spoilsport," he stated, noting that without ​a meaningful cooling-off in ​crude prices, ⁠it will be difficult for the currency to sustain its recent surge.

Crude prices remained above the $ 95 a barrel mark as rising tensions between the United States and Iran kept riskier assets on the back foot, with more concerns emerging of supply-chain disruptions.

Traders at large will be awaiting key economic data such as the non-farm payrolls data, which will decide the path that the The US central bank might take in its upcoming interest rate meeting.

“Expectation that oil firms will keep buy dollars due to elevated crude prices is always there…We are awaiting what action the RBI could take in case the indian rupee falls further towards Rs 95 marks,” market watchers from Finrex Treasury Advisors stated.