Indian Rupee Under Pressure as Brent Crude Tops $96 Amid US-Iran Tensions
3 days ago
At a glance
- The Indian rupee is expected to remain under pressure, trading around 96.50-96.70 against the dollar.
- Brent crude oil prices have risen above $96 per barrel, with a risk of exceeding $100.
- Indian equities are anticipated to open lower due to rising oil prices and US-Iran tensions.
Story so far
The Indian rupee has fallen to a two-month low of 96.5650 against the dollar, largely due to surging oil prices fueled by Middle East supply disruption fears. The Reserve Bank of India has intervened to defend the rupee, selling billions in foreign exchange. Escalating US-Iran tensions and Houthi threats to shipping have pushed Brent crude prices above $95 per barrel, impacting Indian bonds and stocks. The rupee is now expected to remain under pressure, with Brent crude topping $96 and a risk of crossing $100, further affecting Indian equities.
Latest development
The Indian rupee is expected to remain under pressure, trading around 96.50-96.70 against the dollar, as Brent crude prices have risen above $96 per barrel amid US-Iran tensions.
Latest updates
The Indian rupee is expected to remain under pressure, trading in a 96.50-96.70 range against the dollar, with downside risks, though the Reserve Bank of India's support may limit losses. Brent crude prices have risen above $96 a barrel, with analysts suggesting a risk of prices crossing the $100 mark.
Indian equities are anticipated to open lower, with GIFT Nifty futures indicating a potential drop below Wednesday's close. Foreign and domestic institutional investors have intensified selling pressure, contributing to the Indian blue chips' largest one-day loss in two weeks. Rising oil prices continue to fuel inflation concerns and could lead to further interest rate hikes by the US Federal Reserve.
The Reserve Bank of India (RBI) sold a net $6.1 billion in the foreign exchange market in May, data released on Wednesday showed. During May, the RBI purchased $22.2 billion and sold $28.3 billion. This intervention aimed to support the rupee, which had fallen to a record low of 96.96 per dollar in May due to surging oil prices. The central bank's net outstanding forward dollar sales reached $106.6 billion by the end of May, an increase from $95.3 billion at the end of April.
Indian government bonds fell for a fourth consecutive session on Wednesday, with the benchmark 6.94% 2036 bond yield settling 1 basis point higher at 6.8012%, its highest level since June 24. Brent crude prices rose 3.3% to a six-week high of $94 a barrel in Asian trade. The Indian rupee also weakened to 96.5650 per dollar. Meanwhile, US forces struck Iranian military targets for an 11th straight night, and three Saudi crude carriers diverted from the Red Sea following warnings from Houthi militia. Bargain buying from state-run banks helped limit some bond losses, with investors anticipating a possible resolution to the US-Iran conflict. Overseas investors have purchased $4.3 billion worth of bonds under the Fully Accessible Route since June 1, though the pace of inflows is expected to slow.
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