Rupee likely to contend with outflows even as US-Iran ceasefire reports give oil relief
The Indian rupee could find marginal breathing room on Friday on reports that the U.S. and Iran have agreed to extend a ceasefire, while traders will be wary of latching onto momentum as multiple reports in recent memory have led to no resolution.
Dollar outflows related to the global equity index adjustments, though, are likely to be a pressure point for the currency on the day, two traders said.
The rupee is expected to open in the 95.90-95.95 range, per traders, slightly weaker than its close at 95.69 on Wednesday. India's financial markets were shut on Thursday for a local holiday.
Oil futures fell on hopes for a potential deal to extend a U.S.-Iran ceasefire, although remarks from Vice President JD Vance that the nations were "close" to reaching a deal but "not there yet" kept a floor under prices.
The Trump administration has several times said a deal to end the fighting was close, only to have Iran dispute or downplay the claims.
Brent crude futures for July, which expire on Friday's settlement, were down 1.1% at $92.6, while the more actively traded August Brent futures were down 1% to $91.7.
"The market has increasingly priced in a resolution this week. Therefore, any confirmation of a deal that reopens the strait means that significant further downside is likely limited, particularly during the early stages of a ceasefire," analysts at ING said in a note.
Elevated oil prices present steep macroeconomic risks to India, which imports about 80% of its energy requirements. Reflecting the risks, wagers against the Indian rupee, Philippine peso, and Thai baht also stayed elevated, underscoring caution toward Asia's net oil importers.
The rupee has declined about 5% since the war in Iran began in late February and was on course for a near 1% month-on-month decline.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 96.25; onshore one-month forward premium at 30 paisa
** Dollar index at 99.02
** Brent crude futures down 1.1% at $92.6 per barrel
** Ten-year U.S. note yield at 4.44%
** As per NSDL data, foreign investors sold a net $107.9mln worth of Indian shares on May. 26
** NSDL data shows foreign investors bought a net $29.7mln worth of Indian bonds on May. 26
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