Rupee at risk of slipping to all-time low on worries US-Iran truce may collapse
The Indian rupee is set to weaken at Tuesday's open, with a possible slide to a lifetime low against the U.S. dollar, on concerns that the fragile U.S.-Iran ceasefire may be fraying, keeping oil prices high and the currency under pressure.
The rupee is expected to open at 95.45–95.55, traders said, after sliding 0.88% to 95.31 in the previous session. At those levels, the currency would surpass the all-time low of 95.4325 hit last week.
Since the Iran war broke out in late February, triggering a surge in oil prices, the rupee has remained under pressure, interrupted only briefly by bouts of central bank intervention.
That pressure shows little sign of abating, with U.S.–Iran negotiations to resolve the conflict making little progress. While the two sides agreed to a ceasefire on April 8, comments from U.S. President Donald Trump suggest the truce may be at risk.
Trump said on Monday the ceasefire was "on life support", citing disagreements over key demands, including a halt to hostilities on multiple fronts, the lifting of a U.S. naval blockade, the resumption of Iranian oil exports, and compensation for war damage.
"Oil prices remain highly sensitive to noise around Iran, highlighting the significance of the ongoing supply disruptions in the Persian Gulf," ING Bank said in a note.
Brent crude rose 1% to $105.22. Asian currencies and equities fell alongside U.S. equity futures, while Treasury yields climbed. Brent has surged 46% since the war began, posing a major challenge for India, which imports most of its energy needs.
The scale of the challenge posed by high oil prices was underscored by comments from Prime Minister Narendra Modi on Sunday. He urged a range of measures, including fuel conservation, work-from-home practices, and curbs on travel and imports.
In an already nervous market, Modi's comments further dented sentiment, a currency trader at a bank said.
