Rupee Strengthens 67 Paise As US-Iran Agree On Ending War
Traders said that RBI intervention provided additional support to the local unit: Reports
MUMBAI: The Indian rupee strengthened sharply by 67 paise to 94.61 against the dollar on Wednesday on reports that the US and Iran may agree on a one-page memorandum aimed at ending the war, thereby improving global risk sentiment.
This was the rupee’s largest single-day gain since April 1, an appreciation of 83 paise from its lows of 95.44 to a dollar, bolstered by a retreat in crude oil prices and a weakening US dollar against major currencies. Brent crude declined nearly 6 per cent to the $103–104 per barrel range, marking its steepest two-session fall since the April ceasefire offering a degree of comfort to India's import
bill and inflation outlook.
Traders said that RBI intervention provided additional support to the local unit. Most Asian currencies edged higher on Wednesday as signs of easing Middle East tensions supported risk appetite while the Sout Korean Won outperformed after better-than-expected inflation data.
“Markets continue to factor in a potential de-escalation of tensions and easing supply constraints, both of which have pulled crude and the greenback lower. Technically, spot USDINR has support at 94.35 and resistance at 95.10,” said Dilip Parmar – Senior Research Analyst, HDFC Securities.
“For rupee, oil has been the main concern and if the same falls to below $ 100, it would be a substantial gain as the premiums for war would be down and the premiums being charged to India will be down. We are expecting 94.50 and 94.00 levels to be seen soon and if oil falls further below $ 90, we could see the rupee rising to 93.50 also,” said Anil Bhansali, head of treasury of Finrex Trading Advisors.
At the interbank foreign exchange market, the rupee opened at 95.03 against the US dollar, then lost ground and touched an intraday low of 95.18. The rupee finally settled at 94.61, registering a rise of 67 paise over its previous close of 95.28. The Dollar Index, which gauges the greenback's strength against a basket of six currencies, was trading at 97.86 level on hopes of a US-Iran deal.
The US-Iran conflict has exerted downward pressure on emerging market currencies, especially for large energy importers like India. The rupee has weakened close to 6 per cent against the dollar this year, the worst performance in Asia. While anti-speculative measures rolled out by the central bank in March and April briefly helped the currency, pressure is building up again as oil prices remain elevated.
According to a Bloomberg report, the central bank is weighing a plan for state lenders to sell foreign-currency bonds, mulling a tool last used nearly three decades ago to draw capital inflows and shore up the beleaguered rupee, according to people familiar with the matter.
