Indian rupee finds breathing room on oil pullback, soft dollar; Middle East risks linger

MUMBAI: The Indian rupee is poised to find respite during Friday’s session, aided by dip in oil prices and broad-based ​dollar weakness, although traders cautioned that Middle East war risks continue to ‌lurk in the background.

The Indian rupee is tipped to open slightly higher at 95.32-95.35 against the U.S. dollar after settling at 95.3875 on Thursday.

The currency has traded ​in a 94.96-95.60 range so far this week, coming under ​pressure from renewed exchanges of strikes between the U.S. and ⁠Iran, while drawing support from likely intervention by the Reserve Bank ​of India.

The fresh hostilities have revived volatility in oil prices, with Brent ​crude swinging between $71 and $80.50 a barrel during the week. Brent was last quoted at $76.34, down about 2% on Thursday after a rally.

Oil moving away from the $80 level ​is “naturally” good for the rupee,“ a trader at a private sector ​bank said. India imports most of its requirement of the critical commodity.

However, with the fighting ‌continuing, ⁠nervousness around the rupee’s path will persist and the question is whether the conflict “becomes worse” over the weekend, he said.

The near-term outlook appears tied largely to developments in the Middle East and their impact on crude ​oil prices, bankers ​said.

Iranian armed forces ⁠launched attacks on U.S. military infrastructure in Gulf states on Thursday in response to U.S. strikes on ​Iran’s southern coastal and eastern provinces, a move that ​further strained ⁠a three-week-old ceasefire.

The latest escalation in US-Iran military tensions raises fresh risks for the oil market, ING Bank said in a note.

Meanwhile, the dollar ⁠weakened ​against major peers as well as Asian ​currencies. A decline in US Treasury yields from recent highs, coupled with resilience in risk-sensitive assets, ​reduced demand for the dollar.