Rupee headed for new low past 94 on fears Iran war may drag on

MUMBAI: The Indian rupee is set to weaken past 94 per dollar, pressured by risk aversion, rising U.S. Treasury yields and Brent ​crude holding past $100 a barrel on concerns the war in Iran ‌will drag on.

The 1-month non-deliverable forward indicated the rupee will open in the 94.20-94.25 range versus the US dollar, after settling near its lifetime low of 93.9775 on Wednesday.

Indian ​financial markets were off on Thursday for a local holiday.

“The sense now ​is that the Middle East conflict will persist longer than ⁠initially assumed, triggering repricing across assets. The rupee, obviously, will have to ​adjust alongside,” a currency trader at a bank said.

Indian equities were also set to open ​lower on the day, halting a tentative recovery. Despite a 3.5% rally in equities over the last two sessions, foreign investors were net sellers on both days, tempering any positive spillover for the ​rupee.

The local currency has already lost 3.5% since the conflict began on ​February 28, with little sign of respite.

U.S. equities slumped nearly 2% on Thursday, the ‌10-year ⁠U.S. Treasury yield climbed past 4.4% and Brent crude jumped almost 6% on mounting concerns that a near-term halt to the Iran war is unlikely.

US President Donald Trump said ran must make a deal or face a continued onslaught, ​while a senior ​Iranian official told ⁠Reuters that Washington’s proposal to de-escalate the conflict was “one-sided and unfair.”

Separately, the Pentagon is planning to deploy thousands of airborne ​troops to the Gulf to give Trump more options for a ​potential ground ⁠assault, sources told Reuters.

Trading is being “dominated by headlines” that reflect deep divisions between negotiating parties and heightened rhetoric around possible U.S. military involvement in Iran, said ⁠Chris Weston, ​head research at Melbourne-based Pepperstone.

Meanwhile, Trump’s announcement of ​a 10-day pause in attacks on Iran’s energy facilities did little to lift risk assets or trigger ​a meaningful reaction in oil markets.