Indian rupee may see relief on tentative signs of risk recovery; oil remains a worry
- The currency hit an all-time low of 92.3025 during the session, pressured by the rally in oil
MUMBAI: The Indian rupee may see modest relief at open on Thursday on the back of a pullback in the dollar and tentative signs of recovery in risk sentiment, though concerns over the impact of the Middle East war on oil prices remain a headwind.
The 1-month non-deliverable forward indicated the rupee will open in the 92.10 to 92.12 range versus the U.S. dollar, having settled 0.74% weaker at 92.15 on Wednesday.
The currency hit an all-time low of 92.3025 during the session, pressured by the rally in oil.
Bankers said the rupee will remain sensitive to crude oil moves, while market participants will be alert to potential intervention by the Reserve Bank of India after the currency dropped 1.3% over the last two days.
“Right now the rupee is being driven almost entirely by oil. As long as the (Mideast) conflict continues to keep crude prices choppy, the pressure will likely persist,” a currency trader at a private bank said.
Brent crude climbed nearly 3% in Asian trading to just below $84 a barrel, not far from the peak of $85.12 it hit after the outbreak of the U.S.-Iran war. Concerns about a prolonged closure of the Strait of Hormuz have underpinned prices, with Brent now up more than 15% this week.
The U.S.–Iran war widened on Wednesday after a U.S. strike hit an Iranian warship off Sri Lanka. Meanwhile, U.S. Senate Republicans backed President Donald Trump’s military campaign against Iran.
Dollar stumbles, equities recover
Amid the focus on the war’s impact on oil prices, risk sentiment showed tentative signs of recovery, though traders cautioned that it may not be durable.
U.S. equities recovered on Wednesday, with Asian markets following through, led by South Korea and Japan.
The dollar index slipped below the 99 mark, weighed down by the improvement in risk appetite.
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