Trump`s Iran comments cool off oil rally, offering rupee respite
The Indian rupee is likely to open higher on Friday, buoyed by a decline in oil prices and a pullback in the U.S. dollar, while worries over the Israel-Iran conflict continue to linger.
Non-deliverable forwards suggest the rupee will open in the 86.60 to 86.64 range, compared to 86.7225 in the previous session. The local unit fell to an over three-month low on Thursday, pressured by a surge in crude prices and hedging by importers.
Brent crude futures were down 2%, having hit their highest level since mid-January on Thursday, amid the U.S. weighing whether to become involved in the Israel-Iran conflict.
President Donald Trump will decide in the next two weeks whether the U.S. will become involved in the Israel-Iran air war, the White House said.
This reduces speculation that the U.S. is planning to imminently join Israel in attacking Iran’s nuclear facilities, ANZ Bank said, sparking a pullback in oil prices.
"A consistent drop in oil is the best support the rupee can have," an FX trader at a private bank said.
"The dollar’s retreat, which is partly tied to reduced risk aversion, will help too. However, any meaningful rupee upside will need a material de-escalation in the Middle East conflict,” he said.
The dollar index was back below the 99 handle while most Asian currencies were higher.
The rupee, like most oil-sensitive Asian currencies, has been under pressure this week amid fears that a wider Middle East conflict could push oil prices higher and trigger a bout of risk aversion.
The rupee is down 0.75% this week through Thursday, putting it on track for its worst weekly performance in one-and-a-half months.
Brent crude, despite Friday’s pullback, remained up nearly 4% for the week, adding to the nearly 12% surge it posted in the previous week.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 86.74; onshore one-month forward premium at 9.25 paise
** Dollar index down at 98.64
** Brent crude futures down 2.3% at $77 per barrel
** Ten-year U.S. note yield at 4.39%
** As per NSDL data, foreign investors sold a net $69.2 mln worth of Indian shares on June 18
** NSDL data shows foreign investors sold a net $2.8 mln worth of Indian bonds on June 18
