By Dharamraj Dhutia
MUMBAI, June 12 (Reuters) – The Indian rupee rallied on Friday, as dollar demand from importers eased with crude prices falling sharply after U.S. President Donald Trump signalled that a deal with Iran could be imminent.
The rupee was trading 0.5% higher at 95.30 to the dollar as of 10:35 a.m. IST.
Brent crude plunged to $88.44 per barrel, its lowest in two months, after Trump said a peace agreement could be signed as early as this weekend. Iran countered that it had not reached a final decision on an agreement.
The deal, if confirmed, would be the most significant diplomatic breakthrough yet to end the three-month-old war.
“Importers are not very active in buying dollars so far today, and that is also helping the move,” a trader with a brokerage said.
Asian equities rallied, U.S. Treasury yields fell and the dollar weakened.
For the rupee, the retreat in oil prices is especially significant as India is the world’s third largest importer and consumer of oil. Elevated energy prices tend to widen the country’s trade deficit, increase demand for dollars and add to inflation risks.
The rupee has been under sustained pressure in recent months as high crude prices, portfolio outflows and broad dollar strength weighed on sentiment.
India’s central bank has responded with a series of measures aimed at attracting inflows and supporting the currency, which have helped in stabilising the currency, but a lasting dip in oil prices would provide a more durable anchor, traders said.
“For the rupee, the real relief will come only from a deal that pushes oil durably lower and removes the risk premium,” a currency trader at a private bank said.
“Until then, the market will remain cautious about chasing the move, and the currency may not be able to rise above 95.”
(Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)
