Rupee falls 22 paise for second week as US-Iran ceasefire boosts sentiment

The Indian rupee closed in gains against the dollar for the second consecutive week, a feat it last achieved six months ago, supported by the unwinding flow of residual arbitrage positions as well as a fall in crude oil prices after a short-lived ceasefire between the US and Iran.

The currency ended marginally lower for the day after a choppy session that saw the currency touch a three-week high of 92.4150 per dollar before slipping to 92.7550 during the day.

It ended 0.1% lower than its previous close, having gained 0.4% this week.

In recent sessions, the Reserve Bank of India’s move to impose a cap on banks’ onshore FX net open positions has supported the rupee, forcing lenders to sell dollars in the domestic market.

Oil prices fell after the US and Iran agreed to a two-week ceasefire earlier in the week, easing some concerns about prolonged disruptions to world crude oil supplies.

The impact of both these developments is now being felt in current prices and the rupee may soon resume its downward trend, traders said.

Amit Pabari, managing director of FX advisory firm CR Forex, said, “The cushion holding the rupee steady is starting to thin and this is where the story starts to change.”

“As domestic support begins to wane, the global backdrop is becoming uneasy again.”

With the possibility of a gradual move towards the 93.50-94.00 levels on the cards, scope for further strength seems limited, he added.

Traders are also cautious about the durability of the US-Iran truce, as reports of continued fighting kept concerns over oil supplies alive, with the benchmark Brent crude contract trading around $97 a barrel, up from $90 on Wednesday.

Foreign investors continued to be net sellers of Indian equities, indicating weak demand for Indian assets.

Market participants now await next day’s US retail inflation data, with interest rate futures pointing to almost no chance of a rate cut before September.