Rupee set to open weaker as oil pressure builds, RBI support in focus
The rupee's weakness is a fairly direct read through of the broader oil driven risk premium building around the Hormuz standoff, with Brent's advance toward the $88 level adding fresh pressure on India's import bill and currency. RBI's consistent dollar selling near current levels is doing the heavy lifting in capping losses, with traders explicitly noting the pair would already be well past 95.50 without that support, underscoring how reliant the rupee is on central bank intervention rather than any independent strength. The added move higher in the US 10 year yield, reversing the softer tone that followed last week's weak payrolls data, adds a second headwind by making dollar assets more attractive just as oil is pushing importer demand for dollars higher. With the oil market remaining highly sensitive to any Hormuz related headline flow, including Trump's counter conditions to Iran's demands, the rupee's near term path looks tightly linked to how that standoff evolves rather than to any domestic driver.
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The rupee is only holding its ground because the RBI keeps showing up, and today looks like another day it will have to.
Info via Reuters.
Summary:
- The rupee is expected to open weaker in the 95.35-95.40 per dollar range, having settled around 95.30 on Monday.
- The currency traded in a roughly 95.10-95.30 range over the prior three sessions, with heavy dollar demand keeping it under pressure while RBI intervention capped losses.
- The RBI likely sold dollars near 95.25 on Monday, though the rupee still slipped, reflecting pressure from importer hedging and higher oil prices.
- A trader said the pair would likely be well past 95.50 without the RBI's consistent dollar selling, and expects similar central bank support today.
- Brent crude rose circa 5% on Monday amid stalled US-Iran peace talks and uncertainty over the Strait of Hormuz reopening, extending gains in Asia trading toward the $88 a barrel level.
- President Trump responded to Iran's list of demands with his own conditions on Monday, while the rise in oil prices pushed the US 10-year Treasury yield up to around 4.70%, reversing its earlier decline on soft jobs data.
The Indian rupee looked set to open weaker on Tuesday, pressured by rising oil prices amid stalled US-Iran peace talks, with traders once again looking to the Reserve Bank of India to intervene and limit the currency's decline.
The rupee is expected to open in the 95.35 to 95.40 range against the dollar, according to traders, having settled around 95.30 on Monday. The currency has traded in a roughly 95.10 to 95.30 band over the past three sessions, with persistent dollar demand keeping it under pressure even as RBI intervention has helped cap the extent of its losses.
On Monday, the central bank likely sold dollars near the 95.25 level, though the rupee still slipped further, a sign of the pressure coming from importer hedging activity and higher oil prices. One currency trader at a bank said the RBI has been consistently on the offer in the dollar rupee pair, adding that without that support the currency would already be trading well past 95.50. The trader expects Tuesday to follow a similar pattern, with underlying dollar demand needing to be absorbed by the central bank once again.
The pressure on the rupee is closely tied to developments around the Strait of Hormuz standoff. Uncertainty over a US-Iran peace deal and the prospect of reopening the strait pushed Brent crude up circa 5% on Monday, with the rally extending into Asian trading Tuesday and pushing the benchmark toward the $88 a barrel level. The oil market remains highly sensitive to news flow around any signs of progress toward a deal, with President Trump responding to Iran's list of demands with his own set of conditions on Monday, keeping the standoff unresolved.
The rise in oil prices has had a knock on effect in bond markets as well, pushing the US 10 year Treasury yield up to around 4.70%, reversing the decline that followed last week's softer than expected US jobs data. For the rupee, that combination of higher oil prices and rising US yields represents a double headwind, reinforcing the currency's reliance on continued RBI support to avoid a more pronounced slide.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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