Indian rupee heads for steepest rise in three weeks as oil falls
The Indian rupee advanced against the dollar on Monday as oil prices slumped after the U.S. and Iran paused strikes after two weeks of attacks, with rising inflows aiding market sentiment.
Brent crude is down more than 4% to $92.4 per barrel after hitting the psychologically important $100 mark last week.
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This has shored up the rupee by 0.3% to 96.2525 as of 10:00 a.m. IST.
The Indian currency, which was seen at risk of breaching record lows last week, has been helped by firm central bank intervention and optimism about a diplomatic solution to the Iran war.
The U.S. ambassador to the United Nations said that Washington had decided to pause U.S. attacks to allow more time for diplomacy, and an Iranian source told Reuters that Tehran has more scepticism than optimism over the latest lull in fighting.
“While it is difficult to know for sure how things will pan out, our base case remains for de-escalation over time,” analysts at MUFG said in a note.
Foreign inflows spurred by a series of recent central bank measures are also aiding sentiment by bolstering firepower to push back against depreciation pressures.
Dollar-mobilisation schemes announced by the Reserve Bank of India in June have attracted nearly $32 billion, RBI Governor Sanjay Malhotra told the Hindu BusinessLine in an interview published on Monday.
“The depreciation in the rupee this year is not a reflection of India’s sound economic fundamentals. It has been largely driven by the expectations channel,” Malhotra said in the interview, adding that recent policy measures should improve sentiment.
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Meanwhile, dollar-rupee forward premiums retreated with the 1-year implied yield down 5 basis points at 2.87%, tracking a fall in the dollar-rupee and a pullback in wagers on future rate hikes in India.
Shares in Mumbai rose 0.7% and the benchmark bond yield fell 5 basis points.
