At the open traders expect the rupee to trade weaker against the dollar, pressured by surging oil and risk aversion. Market participants are watching near record levels and are increasingly uncertain whether fresh RBI measures can restore dollar inflows and steady the currency.
Mumbai, July 16 – The Indian rupee, according to traders, is set to extend its declines at the opening of trade on Thursday, pressured by high oil prices and broad pessimism about the currency after recent market movements.
At the open, the rupee is expected to trade in a range of 96.35–96.40 per U.S. dollar; on Wednesday it closed at 96.2550.
Overall pressure on the currency intensified due to the rebound in oil prices after the flare-up between the United States and Iran. The currency came under pressure from higher oil prices and the dampening effectiveness of previous measures to spur dollar inflows.
As of the month, the rupee has fallen about 1.7%, and is now close to its record low of 96.96 per dollar, recorded in May.
The rupee’s support, provided by the Reserve Bank of India’s measures to attract dollar inflows, has nearly dried up, said bankers, leaving currencies more vulnerable to rising oil prices.
According to one currency trader, the short-term market mood has shifted: some participants returned to buying the dollar/rupee on dips, anticipating further upside for the pair.
PROBLEMS WITH OIL
Brent prices have risen above $85 per barrel on concerns about possible supply disruptions amid the escalation of tensions in the Persian Gulf region.
On Wednesday, the United States carried out strikes on Iran’s coastal defenses and missile facilities after the resumption of the maritime blockade of Iranian ports, while Iran threatened to curb additional energy exports in the region, saying it was in an existential war with Washington.
Neither the United States nor Iran shows any real intention to ease the latest spike in tensions
– ING Bank
The flare-up has a significant impact on shipping flows from the Persian Gulf, which could affect regional and global energy routes.
In the coming days, investors will be watching movements in the oil market and monetary policy, as these factors will determine the rupee’s trajectory. External factors, including fluctuations in oil prices, will continue to shape the currency’s movement, so expectations of further pressure on the rupee remain high.
