Markets

Indian rupee may drift towards 96 on twin drag from oil and U.S. yields

  • The ​Indian rupee is expected to open in the 95.94-95.98 range, traders ​said, after settling at 95.62 on Monday
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MUMBAI: The Indian rupee is poised to weaken towards 96 per US dollar after a third consecutive night of US strikes ​against Iran reinforced fears of the fragile ceasefire breaking down ‌and fuelled a renewed rise in oil prices.

Hawkish comments from a Federal Reserve official sent US yields higher and are expected to further undermine the rupee, traders said.

The ​Indian rupee is expected to open in the 95.94-95.98 range, traders ​said, after settling at 95.62 on Monday.

Brent crude climbed to $85.64 ⁠a barrel in Asian trading, its highest level in more than a ​month, after the U.S. military renewed strikes on Iran and reports emerged ​of attacks on tankers in the Strait of Hormuz.

Brent surged nearly 10% on Monday and is now up more than 20% from its recent lows, unwinding much of ​the relief the rupee had derived from softer oil prices.

The rupee had ​recovered to near 94, with measures announced by the Reserve Bank of India to ‌attract ⁠dollar inflows improving the currency’s near-term outlook.

While a chunk of the inflows linked to the RBI’s measures are still awaited, the rupee’s main source of pressure, oil, has returned, a currency trader at a bank said.

The ​currency is now inching ​towards its ⁠all-time low of 96.96 hit in mid-May.

However, the trader added he does not expect the rupee to hit a ​lifetime low “anytime soon”, citing the likelihood of RBI intervention.

US ​yields ⁠add to pressure

The rupee’s challenges have been amplified by a rise in US Treasury yields.

Short-dated Treasury yields climbed to their highest levels in 17 ⁠months on ​Tuesday amid higher oil prices rekindling inflation ​concerns.