The Indian rupee has started Monday’s trade on a strong note, charting back into the 94 category against the US dollar, as it was up nearly 3% from its record lows, aided by a slump in oil prices following reports of a US-Iran ceasefire agreement and the reopening of the chokepoint, the Strait of Hormuz, which buoyed investor sentiment.
Rupee rises around 3% from record lows
The domestic currency touched a five week high of 94.45 per dollar in the intraday session, up 2.6% from its record low of 96.96, which it had touched on May 20. It ended the session at 94.71 per dollar, up 0.4% from its previous close of 95.11 per dollar.
The appreciation came as crude oil prices slumped 5%, trading below the $85 per barrel mark, fuelled by the announcement of a peace deal between Tehran and Washington.
Oil prices were trading at their lowest levels since March, with Brent crude futures quoted around the $83 per barrel mark, while the US benchmark, West Texas Intermediate, was trading near the $80 per barrel level.
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US-Iran peace deal lifts investor sentiment
US President Donald Trump, in a social media post, said, “Ships of the World, start your engines,” which lifted investor sentiment over the resumption of transit through Hormuz passage.
While the deal is yet to be signed, Pakistan’s Prime Minister Shehbaz Sharif has confirmed that the official ceremony will be held on Friday, June 19, in Switzerland. “Trend for the rupee looks upward if the deal is implemented to satisfaction without any problems emanating from the three nations US, Iran and Israel,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors LLP.
The dollar index fell to a 10-day low of the 99.3 level, down 0.4% on the day, lifting investor sentiment for the domestic currency.
Since oil is predominantly traded in dollars, the reopening of the waterway passage, which transits nearly 20% of global crude and liquified natural gas supplies is likely to weigh positively on world’s third largest net oil importer Indian rupee, by reducing the safe-haven demand for the greenback.
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Bulls take over market
The indices opened on a strong footing but closed slightly off the day’s high. The NSE Nifty 50 ended the session 231 points, or 0.98%, higher at 23,853.90, while the 30-stock index, Sensex, settled the day 736.38 points, or 0.97%, higher at 76,264.33.
Similarly, the broader indices followed suit, closing in the green. The Nifty Midcap 100 finished 782 points or 1.29% higher at 61,549.65. The Nifty Bank settled 384 points or 0.68% higher at 57,198.80.
Rise in Indian equity markets is usually beneficial for the domestic currency as they help with foreign capital influx into the country and improve market sentiment. As per provisional NSE data for June 12, FIIs were net sellers of domestic equities worth Rs 872 crore.
Outlook for Rupee
With the recent RBI measures and the slump in oil prices, experts note that the Indian rupee may trade within the 93-94 per dollar band in the coming months.
“Over the next one to two weeks, we expect it to strengthen towards 94, and a decisive break of that level would open the door to 93, and potentially 92.5, over the following 2-3 months. For now, 94 is the key level to watch, and below that, 93,” said Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities.
TOPICSBrent crudeCrude oilcrude oil pricesIndian rupeerupeeRupee vs us dollarStrait of HormuzWest Texas Intermediate (WTI) + 0 MoreThis article was first uploaded on June fifteen, twenty twenty-six, at forty-five minutes past eleven in the morning. © IE Online Media Services (P) Ltd