Indian rupee likely to shrug off US-Iran flare-up; limited impact on oil, Asia FX

MUMBAI: The Indian rupee is set to open largely flat to slightly weaker on Monday, with fresh US-Iran hostilities having little impact on oil prices, risk appetite and Asian currencies.

The rupee is expected to open in the 94.40–94.44 range on Monday, traders said, after settling at 94.3950 on Thursday.

Indian financial markets were shut on Friday.

The currency traded in a 94.15–94.92 range last week, supported by falling oil prices, while tepid risk appetite and dollar strength weighed.

Last week’s range reinforced that 94 to 95 is the settled band for the near term, a currency trader at a bank said.

“It’s back to watching oil with the re-escalation between the US and Iran. Then we have to see how risk sentiment holds up and what the dollar does.”

Brent crude was up a modest 0.6% to $72.44 after tit-for-tat strikes between the US and Iran underscored the fragility of their interim understanding and disrupted shipping in the Strait of Hormuz.

The upside was capped by an Axios report that Washington and Tehran have agreed to halt attacks ahead of a potential meeting in Qatar on Tuesday.

Analysts warned that the oil markets may be underpricing risks.

There’s still plenty of risk facing the oil market, ING Bank said in a note.

The market’s “complacency is odd and leaves significant upside risk if the supply recovery proves slow – or if we see significant re-escalation.”

Asian currencies were mixed at the start of the week, with oil-sensitive units, the Indonesian rupiah and the Philippine peso, showing little reaction.

The dollar index was largely flat at 101.32. US equity futures pushed higher.