Indian rupee supported by oil slump, capped by Asian weakness in run-up to Fed

MUMBAI: The Indian rupee is likely to open marginally higher on Wednesday, aided by a further drop in oil prices, though weakening in ​Asian currencies ahead of the Fed decision may cap the ‌advance.

The Indian rupee is expected to open in the 94.50-94.55 range to the US dollar, per traders, having settled at 94.56 on Tuesday.

Brent crude tumbled 5% on Tuesday to ​below $80, taking losses over four sessions to about 15% on expectations ​a US-contract is at its lowest since the first week of March, ⁠roughly only $7 above the pre-conflict level.

Details began to emerge on Tuesday of ​the US and Iran’s interim peace agreement, with U.S. President Donald ​Trump saying it will rule out a nuclear weapon for Tehran and a U.S. official saying it allows Iran to sell oil upon signing.

While the slide in ​oil prices points to rising optimism about the normalization of flows, ​analysts have urged caution.

“Many questions remain on how the interim US-Iran deal will be ‌implemented,” analysts ⁠at ANZ Bank said in a note.

“Concerns over the safety of vessels remain high, while there is some doubt on whether the chokepoint for a fifth of the world’s supply will remain toll-free.”

The rupee has ​climbed about 1.2% in ​the last six sessions, ⁠helped by the slide in oil prices, a major boost for net energy importer India. However, the currency has struggled ​to sustain moves past the 94.50 level over ​the last ⁠two sessions.

Traders said that threshold may remain a hurdle on Wednesday, pointing to weakness in Asian currencies. Focus is firmly on the Federal Reserve’s ⁠first ​policy decision under Chair Kevin Warsh, where ​rates are widely expected to be left unchanged, though the statement, economic projections and press ​conference will be closely scrutinised.