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 was trading at the 94.45 per dollar mark in early trade, up 2.6% from its record low of 96.96, which it had touched on May 20. 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.
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.
Following which, the dollar index fell to a 10-day low of the 99.3 level, down 0.4% on the day, ligting 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.
Bulls take over market
The NSE Nifty 50 opened the trade 356 points or 1.51% higher at 23,979, while the BSE Sensex jumped 1,189.61 points or 1.58% to open at 76,717.
Rising Indian equity markets are 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.
