The domestic currency has gained around 1.2% over the last six trading sessions as easing oil prices improved sentiment towards India, a major net importer of crude.
Brent crude futures fell nearly 5% on Tuesday (June 16) to slip below $80 a barrel, extending losses to about 15% over the past four sessions.
The drop in oil prices followed reports of an interim agreement between the United States and Iran that could eventually allow Tehran to resume oil sales, raising expectations of improved global supply conditions.
Lower crude prices are generally positive for the rupee as they help reduce India’s import bill and ease pressure on the country’s trade deficit and inflation outlook.
However, traders expect the rupee’s gains to remain capped as weakness in Asian currencies and caution ahead of the US Federal Reserve’s policy decision keep investors on edge. The rupee has struggled to sustain gains beyond the 94.50 level over the past two sessions.
Market participants are closely watching the Federal Reserve’s first policy announcement under Chair Kevin Warsh. While the US central bank is widely expected to keep interest rates unchanged, investors will focus on the accompanying statement, economic projections and comments for clues on the future path of monetary policy.
Analysts also warned that despite the recent slide in oil prices, uncertainties remain over the implementation of the reported US-Iran agreement and the broader security situation in key shipping routes, which could continue to influence energy markets and currency movements.
Kaveri More, Commodity Technical Analyst at Choice Broking, expects the rupee to trade in the 94.25-95.00 range in the near term.
More said the currency has benefited from easing West Asia tensions and lower oil prices, but cautioned that the sustainability of the reported US-Iran peace deal and the direction of crude prices will be crucial in determining whether the rupee can extend its recent gains.
-With Reuters inputs
