The domestic currency has rallied about 1.1% over the last two sessions, supported by a sharp decline in crude prices, with Brent crude slipping to $82.40 per barrel on Monday (June 15), its lowest level in more than three months.
Market participants said the rupee’s near-term trajectory will largely depend on whether the decline in oil prices proves durable.
“If the drop in oil holds up, there is room for a move to 93.50-94.00,” a currency trader at a bank said, adding that a rebound in crude prices could once again put pressure on the rupee.
Global markets adopted a more cautious stance on Tuesday (June 16) as the initial optimism surrounding the Iran-US peace deal began to fade. Oil prices edged higher, while most Asian currencies and equities weakened and US Treasury yields rose.
Analysts at MUFG Bank said uncertainty remains around the details of the US-Iran negotiations and the timeline for reopening the Strait of Hormuz, a key global oil shipping route.
They added that the sustainability of the market rally would depend on how the negotiations evolve and whether broader geopolitical tensions in the Middle East remain contained.
For India, a major importer of crude oil, sustained lower oil prices typically support the rupee by easing concerns over the country’s trade and current account deficits.
–With Reuters inputs
