Indian Rupee Firms on Eased Oil Fears

The Indian rupee hovered near 95.5 per dollar, strengthening after the holiday break on reduced pressure from elevated oil prices and easing Middle East tensions. Optimism grew following reports that the United States and Iran were moving toward extending their ceasefire arrangement for 60 days while continuing negotiations over Tehran’s nuclear program. Crude prices declined on expectations that disruptions to energy flows through the Strait of Hormuz could ease if diplomatic talks progress further. Brent crude fell toward $92 per barrel and remained on track for its steepest monthly decline since 2020, offering some relief to oil-importing economies. Meanwhile, traders also pointed to likely dollar outflows linked to global equity index rebalancing as a near-term source of volatility for the Indian currency. The rupee has weakened roughly 5% since the conflict involving Iran escalated earlier this year and remained on track for a monthly decline.

The Indian rupee hovered near 95.7 per dollar, easing after reaching its strongest level in nearly two weeks, as renewed geopolitical tensions and stronger importer demand for dollars pressured the currency. Fresh US military strikes in southern Iran weakened hopes for a near-term Middle East peace deal, while Brent crude prices rebounded more than 2% to above $98 per barrel. The rupee had earlier recovered from record lows of 96.96, supported by improved sentiment and dollar-selling intervention by the RBI. Still, traders expect the rebound to face headwinds from month-end importer demand and maturing offshore non-deliverable forward positions. Meanwhile, concerns over imported inflation intensified after India raised compressed natural gas prices following another fuel price hike this month. Goldman Sachs also raised its inflation forecast and now expects two more RBI rate hikes this year. The forex market will be closed on Thursday and will continue trading on May 29.

The Indian rupee strengthened to around 95.4 per dollar, extending its rally for another session to a two-week high as sentiment improved on easing crude oil prices and supportive remarks from the Reserve Bank of India. Support for the rupee increased after Brent crude prices fell below $100 per barrel for the first time in over two weeks amid optimism that the US and Iran are moving closer to a peace agreement. Sentiment was further boosted after Sanjay Malhotra stated that the RBI would do “whatever is required” to ensure orderly forex market movements, adding that the rupee appears undervalued. He also said the central bank has around $700 billion in reserves to curb volatility. However, gains in the rupee were partly limited by persistent inflation concerns after India’s state-owned fuel retailers raised petrol and diesel prices for the fourth time in May to offset losses stemming from higher costs linked to the Iran conflict.