By Jaspreet Kalra
MUMBAI, May 7 (Reuters) – The Indian rupee slipped on Thursday after joining a global relief rally in the previous session, as investors remained on tenterhooks waiting for cues on an Iran peace deal, with the fate of the shuttered Strait of Hormuz hanging in the balance.
Iran has said it is reviewing a U.S. peace proposal that sources said would formally end the war while leaving unresolved key U.S. demands that Iran suspend its nuclear programme and reopen the Strait of Hormuz.
Hopes of a deal sent oil prices sliding nearly 8% in the previous session, boosting the rupee to its best day in a month.
On Thursday, Brent crude was a touch higher at $102 a barrel in early Asian hours while the rupee dipped 0.2% to 94.83, tracking largely muted moves in Asian currencies.
Dollar demand linked to maturing positions in the non-deliverable forward market also weighed on the rupee, a trader at a Mumbai-based bank said.
The crude retreat has cooled an otherwise persistently bearish bias on the Indian currency. The 1-month dollar-rupee 25 delta risk reversal, a gauge of option market sentiment, showed that appetite for bearish rupee wagers has lessened.
Higher energy costs stoke concerns over India’s external balances and inflation outlook as the country is a net oil importer.
“The latest developments have clearly supported the rupee. But the road ahead will largely depend on how the Iran-U.S. situation unfolds from here,” said Amit Pabari, managing director at FX advisory firm CR Forex.
“A pullback toward the 94.20–93.80 range appears possible as markets absorb recent developments and react to any further easing in geopolitical tensions,” he added.
Global markets were trading with a risk-on tone with MSCI’s gauge of shares in Asia Pacific excluding Japan hitting a record high.
Shares in Mumbai rose 0.2%, lagging peers, as investors continued to gravitate towards a blistering AI-linked rally. The dollar index was steady.
(Reporting by Jaspreet Kalr and Nimesh Vora; Editing by Rashmi Aich)
