MUMBAI: The Indian rupee is likely to extend its recent fall at the open on Thursday, bogged down by the US dollar’s overall strength and risk aversion amid the ongoing Iran-Israel conflict.
The 1-month non-deliverable forward indicated a open in the 86.54 to 86.58 range, versus 86.4775 in the previous session.
The Indian rupee has declined 0.5% over the last two sessions, weakening past key support zones.
A currency trader at a bank said the next support lies at 86.70–86.75, which corresponds to the mid-April low.
“The rupee was already struggling with oil prices. Now, it has to deal with the dollar regaining some safe-haven appeal—at least that’s what the price action suggests,” the trader said.
The dollar index rose 0.2% on Thursday, climbing past the 99 mark.
US equity futures and Asian shares slipped, while the US currency advanced 0.2% to 0.8% against Asian currencies on likely safe-haven demand.
Investor attention stayed fixed on the Iran-Israel conflict and the risk of US involvement, with the two countries exchanging further air strikes on Thursday.
Asked outside the White House on Wednesday whether he had decided to support Israel’s air campaign, President Donald Trump said, “I may do it. I may not do it.”
Markets have so far been complacent about the Iran-Israel battle, with sentiment broadly holding up, DBS research said in a note. However, any direct US involvement could trigger a deterioration in sentiment, it said.
Indian rupee rally likely to extend on positive Asian cues, inflow hopes
Meanwhile, the Federal Reserve, in line with expectations, made no changes to the policy rate, while raising its inflation forecasts and trimming growth projections.
Analysts said the updated dot plot sent mixed signals.
While the Fed maintained its forecast for two cuts in 2024, it trimmed the number of projected cuts for 2025 and 2026 by one each.
DBS noted that two cuts in 2025 are dovish, while the projections for 2026 and 2027 leaned hawkish.
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