Rupee strengthens to 94.61 against dollar as US-Iran deal keeps oil prices subdued

The Indian rupee opened 10 paise higher at 94.61 against the US dollar on Tuesday (June 16), compared with Monday’s (June 15’s) close of 94.71, extending gains as investors continued to assess the impact of lower crude oil prices following the Iran-US peace agreement.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