Twin relief from oil and dollar to prop up rupee at open
The Indian rupee is likely to strengthen at Tuesday's open, aided by cooling oil prices following a pause in Iran-Israel hostilities, which in turn pressured the dollar.
The rupee is expected to open in the 95.46 to 95.52 range, per traders, after falling 0.8% to 95.7075 on Monday.
The currency is trading near levels seen before the Reserve Bank of India's policy last week, which announced a series of measures to draw in dollar inflows.
The steep fall on Monday surprised most currency traders, many of whom have turned modestly bullish after the RBI's steps.
"It is largely about flows," a trader at a private sector bank said, noting that daily and hedging demand for dollars remains a challenge.
He added that the rupee's recovery from near 97 to 95, along with lower hedging costs, was likely to bring in importer interest.
Still, the RBI's measures are expected to bring in billions of dollars, alleviating pressure on the rupee, whose trajectory would then largely depend on crude price movements.
Oil prices have retreated from recent highs but remain highly volatile, tracking shifts in news flow. Brent crude surged to $98 on Monday after renewed Israeli strikes on Iran and attacks in Lebanon dashed hopes of an imminent ceasefire in the broader conflict.
Prices later cooled to around $94 after Iran and Israel called a halt to hostilities following an appeal from U.S. President Donald Trump.
Asian currencies rose, supported by the pullback in oil prices and an improvement in risk sentiment.
Meanwhile, U.S. yields nudged higher, with the 10-year note at 4.5650%, posing a potential headwind for Asian currencies.
Expectations that the Federal Reserve will raise rates this year are keeping upward pressure on U.S. yields.
