The rupee is expected to remain sensitive to movements in crude oil this week, with traders closely watching developments in the conflict involving the United States and Iran and their potential impact on global energy markets.
Brent crude rose more than 4% in Asian trading to $79.28 per barrel after tensions intensified over the weekend. Tehran expanded its strikes to Qatar and the United Arab Emirates following fresh US attacks on Iran, reigniting concerns over supply disruptions through the Strait of Hormuz, a key global oil shipping route.
For India, which imports more than 85% of its crude oil requirement, higher oil prices typically widen the trade deficit, increase demand for dollars from oil importers and put pressure on the rupee.Last week, the rupee traded in a 94.96-95.60 range, largely mirroring fluctuations in crude oil prices. Market participants expect that trend to continue as investors assess whether the latest geopolitical developments lead to sustained increases in energy prices.
Currency traders are also watching the Reserve Bank of India’s response. Market participants said the central bank has continued to provide support to the rupee, and intervention could become more significant if rising oil prices trigger sustained pressure on the domestic currency.
Apart from RBI action, traders are monitoring whether higher oil prices fuel inflation concerns globally, which could push up US Treasury yields and strengthen the dollar further, adding to pressure on emerging market currencies, including the rupee.
-With Reuters inputs
