Indian rupee fragile recovery faces test from oil rally, higher US yields
- The Indian rupee is expected to open in the 95.14-95.18 range, according to traders, after settling at 94.9675 on Tuesday
MUMBAI: The Indian rupee is poised to weaken at the open on Wednesday, pressured by a surge in oil prices and higher US Treasury yields after tensions in the Middle East resurfaced.
The Indian rupee is expected to open in the 95.14-95.18 range, according to traders, after settling at 94.9675 on Tuesday. The Indian currency had managed a modest reprieve on Tuesday after sustained pressure in recent sessions.
The currency notched its best session in more than three weeks on Tuesday, aided by a burst of dollar selling in the non-deliverable forwards market.
Prior to Tuesday’s advance, the rupee had fallen 1% in a little over a week.
The recovery, which most traders said was fragile, may prove short-lived with the market’s focus shifting back to rising oil prices.
Brent crude climbed 2.6% to above $76 a barrel, extending Tuesday’s 3% rally.
Any “negative surprise” on U.S.-Iran that pushes crude higher could create a large impact on the rupee, CR Forex said.
A move towards the 95.80–96.00 zone cannot be ruled out if oil-related risks emerge, it added.
The U.S. unleashed a new wave of strikes against Iran on Tuesday and revoked a license allowing the country to sell oil after three tankers were hit by projectiles in the Strait of Hormuz, adding pressure to an already shaky ceasefire.
“While the revocation doesn’t fundamentally change oil market dynamics, it’s important from a sentiment perspective. It heightens the risk of a breakdown in the temporary deal between the U.S. and Iran,” ING Bank said in a note.
The jump in oil prices added to the already existing inflation concerns, prompting investors to sell U.S. Treasuries. The 10-year Treasury yield rose to 4.5650%, its highest level in just under a month.
The dollar index inched past 101, while Asian currencies and equities weakened.