The Indian rupee dipped on
Wednesday and appeared prone to steeper losses on elevated oil
prices, with dollar sales from state-run banks capping some
decline, a familiar pattern over recent trading sessions as the
South Asian unit remains under pressure.
Ebbing hopes of an imminent resolution to the U.S.-Israeli
war on Iran have lifted oil prices to the vicinity of $100 per
barrel, keeping alive investor worries over the risks
confronting energy importers like India.
On the day, the rupee was down 0.1 per cent at 95.7675 per
dollar, with trading in Asia thinned out by a clutch of regional
holidays.
The dollar held gains from the previous session after Iran
said the U.S. had violated a ceasefire, potentially complicating
efforts to bring the three-month-long war to a close.
The worries could complicate the rupee’s nascent recovery,
sparked by firm central bank interventions that had shored up
the currency from its record low of nearly 97 per dollar.
“The rupee has started moving like a shadow of Brent crude —
reacting almost instantly to every rise and fall in energy
prices,” said Amit Pabari, managing director at FX advisory firm
CR Forex.
“Technically, the 96.20–96.40 zone is expected to remain a
strong resistance area for USD/INR.”
Meanwhile, dollar-rupee forward premiums dropped on
Wednesday, with the 1-year implied yield down 8 bps at 3.23%.
“It seems like the market got ahead of itself in pricing
rate hikes by the RBI and that is being trimmed now in the swaps
market,” a trader at a foreign bank said.
The 1-year overnight index swap rate, a gauge of future
policy expectations, was last at 6.13 per cent, down 17 bps over the
week so far. India’s central bank is slated to announce its
policy decision on June 5.