MUMBAI: The Indian rupee is set to extend losses at Monday’s open, weighed by fears that the intensifying Israel-Iran conflict is likely to increase oil prices further.
Expectations that the Reserve Bank of India (RBI) will step in to curb depreciation pressures amid oil risks may offer some support to the local currency, traders said.
The 1-month non-deliverable forward indicated an open in the 86.16-86.20 range, versus 86.08 in the previous session.
The Indian currency had slipped to 86.20 on Friday — its weakest level in over two months — following Israel’s attack on Iran. While it recovered from the day’s lows, likely due to an RBI intervention, it still logged its worst daily performance in more than a month.
Indian rupee to open nearly flat, holds upper hand as dollar remains vulnerable
With the Israel-Iran conflict escalating over the weekend and on Monday, the rupee is unlikely to find relief.
Early on Monday, Israel’s air force attacked sites in central Iran with surface-to-surface missile. Brent crude jumped at open on Monday, climbing past $78, before pulling back.
“Oil’s getting jumpy, and if prices keep climbing, it’s hard to bet against (dollar/rupee) moving higher,” a dealer at a foreign bank said.
“That said, RBI won’t just sit back — they’ll keep a lid on things like they always do.”
Other Asian currencies were mostly weaker at the start of the week, while the dollar index was little changed. The focus this week is on a series of central bank policy decisions, with the U.S. Federal Reserve’s meeting on Wednesday taking centre stage.
“A further escalation in Iranian-Israeli tensions could take oil prices above $80 and would mean more upside for the dollar. The Fed was already likely to keep rates on hold through the third quarter and the latest developments only reinforce that,” ING Bank said in a note.
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