Indian rupee set to extend losses as oil headwinds, negative bias pile pressure

MUMBAI: The Indian rupee is likely to extend its decline at Thursday’s open, pressured by high oil prices and a deterioration ​in sentiment toward the currency after the recent decline.

The Indian rupee is ‌expected to open in the 96.35-96.40 range against the US dollar, per traders, having settled at 96.2550 on Wednesday.

The Indian rupee has come under mounting pressure as crude oil ​prices resumed their climb following renewed hostilities between the US and ​Iran.

The currency is down 1.7% so far this month and ⁠is moving within striking distance of its all-time low of 96.96 per US dollar ​touched in May.

The support the rupee had received from the Reserve Bank ​of India’s recent measures to attract dollar inflows has largely faded, bankers said, leaving it more vulnerable to the rise in oil prices.

When oil pulled back toward $70 a ​barrel and the RBI announced measures to boost dollar inflows, the near-term ​bias on the rupee had turned positive, a currency trader at a bank said.

“That ‌is ⁠no longer the case,” he said, adding that recent price action suggests market participants have reverted to a “buy dollar/rupee on dips” strategy, pointing to expectations of further upside in the pair.

Oil woes

Brent crude climbed above $85 a barrel ​on concerns about ​potential supply disruptions ⁠in the Strait of Hormuz as the Middle East conflict escalates.

The U.S. on Wednesday struck Iran’s coastal defence ​and missile installations after re-imposing a naval blockade on ​Iranian ports, ⁠while Iran threatened to curb additional regional energy exports, saying it was engaged in an “existential war” with Washington.

“Neither the US nor Iran is showing any ⁠real intent ​to dial down the latest surge in ​tensions,” ING Bank said in a note.

“The rapid deterioration is having a meaningful impact on ​vessel flows from the Persian Gulf.”