Rupee headed for new low past 94 on fears Iran war may drag on
- The 1-month non-deliverable forward indicated the rupee will open in the 94.20-94.25 range versus the US dollar
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.