Indian rupee ends flat as importers bid for dollar wipes out boost from oil retreat

The Indian rupee closed largely unchanged on Wednesday, caught between comfort from lower crude oil prices and continued dollar demand from domestic importers, including oil marketing companies.

The currency ended the session at 93.3725 per dollar, compared to its previous close of 93.3750.

During the day, the rupee rose to 93.13, giving up gains, before importers stepped in to lock in hedges, traders said. The price-action was echoed by the dollar-rupee far forward premium which remained high following the initial pullback.

Global markets were buoyed this week by the prospect of fresh peace talks between the US and Iran. The dollar index hit a six-week low as signs that diplomatic ties in the Middle East would continue helped calm markets.

“Markets have become more confident that the Middle East crisis is moving towards a resolution … Given how unsuccessful the first round of talks last week was, these dollar levels embed a fair degree of premature optimism,” analysts at ING said in a note.

Indian assets also joined the bullish crowd with the benchmark Nifty 50 rising 1.6% while the yield on the country’s benchmark 10-year bond fell to its lowest level in three weeks.

Meanwhile, data showed that India’s goods trade deficit widened to $20.67 billion. Economists had expected a trade deficit of $32.75 billion in March, according to a Reuters poll, compared with a deficit of $27.1 billion in the previous month.

The war in the Middle East has hampered the country’s exports while also raising the cost of energy and other imports, putting bilateral pressure on the trade balance.