Rupee trajectory pressured by rising oil risks; RBI to temper moves
The Indian rupee is likely to remain under pressure on Friday, with mounting concerns that oil prices may stay higher for longer keeping sentiment fragile, while the central bank is seen smoothing the downside.
The 1-month non-deliverable forward indicated the rupee will open in the 92.30–92.40 range against the U.S. dollar, after settling at 92.19 on Thursday.
The currency hit an all-time low of 92.3575 in the previous session before recovering slightly following intervention by the Reserve Bank of India.
Oil prices remain the dominant factor shaping sentiment across markets, including FX, bonds and equities.
On Thursday, Brent crude climbed 9% to reclaim the $100-per-barrel mark on mounting worries over supply disruptions. Investors are weighing the possibility that disruptions to energy supplies could last longer than previously expected.
Sustained high oil prices would pose risks for India’s economy, raising the import bill, widening the current account deficit and putting pressure on the rupee.
"Understanding how far the conflict and supply shocks will last remains the priority for markets, ING Bank, said in a note, adding emergency measures to alleviate oil supply disruptions may be sending "a hidden negative signal" to markets that world leaders see little room for a quick de-escalation.
U.S. equities dropped on Thursday, while Treasury yields rose.
It appears the market has pushed out its expectations for how long the Strait of Hormuz closure and the broader conflict could last, Chris Weston, head research at Melbourne-based Pepperstone, said.
RBI SUPPORT
The central bank has been propping up the rupee since the conflict began, intervening periodically in the market. Traders expect the RBI to continue leaning against sharp currency moves without attempting to halt the broader downside.
