Rupee contends with doubts over Iran truce; oil ticks up, risk rally peters
The Indian rupee will open Thursday amid concerns that the Iran ceasefire may not fully restore oil supplies through the key Strait of Hormuz, nudging oil prices higher and weighing on risk assets.
The rupee is likely to open in the 92.55-92.65 range versus the U.S. dollar, having settled at 92.58 on Wednesday, traders say.
Brent crude July futures rose more than 2% to $96.76, after plunging 13.2% in the previous session on hopes that a U.S.-Iran ceasefire would allow oil flows to resume via the Strait of Hormuz.
Fresh questions over the viability of the truce, however, have left investors wary.
Israel continued to attack Lebanon on Wednesday, causing Iran to suggest it would be "unreasonable" to proceed with talks to forge a permanent peace deal.
Meanwhile, shippers on Wednesday said they needed more clarity on the terms of the ceasefire before resuming transit through the Strait of Hormuz.
The optimistic mood through Wednesday's session "has been punctuated by concerning headlines, and the situation in the Middle East remains fragile", analysts at ANZ Bank said in a note.
The bank highlighted Iranian media reports that the Strait of Hormuz remains shut until Israeli operations in Lebanon stop.
RISK RALLY FADES
The rally in Asian shares and U.S. equity futures sparked by the ceasefire faded on Thursday, though losses were relatively modest. U.S. equity futures were down about 0.2%.
Minutes from the Federal Reserve's March meeting were seen as largely hawkish, offering little support to risk assets.
Asian currencies were weaker by around 0.1% to 0.4%.
SUPPORT FOR RUPEE
While the modest risk-off mood and a slight uptick in oil prices could pose a challenge for the rupee, the currency is expected to find support through the session from the ongoing unwinding of arbitrage positions by banks, traders said.
"The bias (on dollar/rupee) for today and tomorrow will be marginally on the downside. Post that, I see a return back to at least 93.50," a trader at a private sector bank said
