The rupee's surprise flow-driven recovery on Friday may prove harder to sustain, with weakness across Asian currencies and a deteriorating risk mood weighing on sentiment, while a dip in oil prices may offer relief. Rupee touched a weekly-low of 94.86 on Friday as heavy dollar selling by a large foreign lender and tight spot market liquidity supported the pair. The AI-spending-led selloff presents a mixed picture for the rupee. While it hurts overall risk appetite, India is seen a hedge against the technology-driven rout, potentially supporting foreign inflows. Overseas investors were net buyers of Indian equities on Friday. The jump likely reflects dollar inflows mobilised by banks under the RBI's special FCNR(B) deposit scheme and subsequently swapped with the central bank. Focus in the region is going to be on Euro CPI inflation (flash estimate) and PMI reading for October this week. Preliminary inflation data released last week for some major Euro countries points to upside risk, as inflation rose in Italy to 5.4% in October (from 4.2% in Sep), and France (to 3.4% vs. 3.1%), stayed elevated in Spain (at 4.9%), and eased in Germany (to 2.8% vs. 3.3%; amid cut in fuel taxes). Persistent price pressures in the region, raise the odds of a December ECB hike, even as growth slows, putting the central bank in a difficult position. Rate hike bets could put a floor for the EUR even as pressure, from elevated oil and natural gas prices and the recent downgrade of France rating by Fitch, rise. BoE is expected to hike its policy rate by 25 bps to 4.0% on Thursday, backed by an expected strong majority on the MPC. While further tightening cannot be ruled out, the extent of additional hikes currently priced by the market over the coming years appear excessive as subdued domestic wage pressure and inflation expectations remain broadly anchored. Attention will shift towards Japan’s PMI data to gauge October’s manufacturing and services momentum, and next week to the October’s Summary of Outlook report for forward guidance on the rate trajectory. The pair finds additional support from its safe haven appeal. Oil prices slipped more than 3% on Monday after Iranian and Qatari officials held a third straight day of talks aimed at pushing for a deal to end the US-Israeli war on Iran. Brent crude futures fell $3.68, or 3.2%, to $109.75 a barrel by 0407 GMT while US West Texas Intermediate crude was at $100.69 a barrel, down $3.43, or 3.3%. Oil is seeing a technical pullback this morning after last week’s strong gains. Attention will turn towards US non farm payrolls and trade balance this week, and could sway the expectations around the pace of interest rate hikes by the Fed. Beyond the US, monetary policy decision by the BoE is due to this week, where the central bank is now expected to raise its policy rates by 25 bps to 4.0% on Thursday, marking the first hike in more than three years. www.eforexindia.com......