Indian rupee set to recover after Trump comments calm oil market; risks linger
- The 1-month non-deliverable forward indicated the rupee will open in the 91.90-92.00 range versus the US dollar, having dropped 0.64% on Monday to 92.3275
MUMBAI: The Indian rupee is likely to recover on Tuesday, boosted by a pullback in oil prices after US President Donald Trump said the Iran war would be over soon, bringing relief to investors worried about prolonged disruptions to energy supplies.
The 1-month non-deliverable forward indicated the rupee will open in the 91.90-92.00 range versus the US dollar, having dropped 0.64% on Monday to 92.3275.
Brent crude futures slid more than 10% on Tuesday to around $88.50, sharply off the panic high of $119.50 seen the previous day.
Trump, in a CBS News interview on Monday, said that the war against Iran “is very complete” and that Washington was “very far ahead” of his initial estimate of several weeks. This prompted investors to pare back risk premiums built into oil markets.
Fears of prolonged Persian Gulf supply disruptions are receding after Trump’s comments, ING Bank said, though it cautioned that his words “will only go so far” unless oil flows through the Strait of Hormuz resume.
In response to Trump, Iran’s Revolutionary Guards said they would determine when the war is over and that Tehran would not allow “one litre of oil” to be exported from the region if U.S. and Israeli attacks continued.
Risk recovers
Supported by the drop in oil prices, risk assets rallied, with US equities recovering and Asian shares following suit. US Treasury yields and the dollar index slipped.
Indian equities were poised to open on a positive note.
“The tone is clearly very different today,” a currency trader at a bank said. “However, this remains a very fluid situation and likely to remain headline-driven. Prefer to keep positioning light considering the risks of large two-sided moves.”