Rupee slipped to its weakest level \u200bin nearly two weeks on Tuesday as oil prices jumped \u200con fading hopes for a U.S.-Iran deal \u200bto end the war and reopen the \u2060Strait of Hormuz.<\/p>\n
Likely dollar selling intervention by the Reserve Bank of India, though, helped limit the currency\u2019s losses, traders said.<\/p>\n
Wedged \u200cbetween the competing forces, the currency closed out the day\u2019s session at 95.4350 per \u200cdollar, down 0.15% from its previous close.<\/p>\n
The worries \u200calso \u2060dented equities, with the Nifty 50 down 0.5% \u2060and the benchmark 10-year bond sliding, pushing its yield 3 basis points higher.<\/p>\n
India is seen as particularly vulnerable to ructions \u200bin oil prices as it \u200cimports nearly 90% of its crude requirements. Brent crude oil futures were last up nearly 2.5% to $89.9 per barrel.<\/p>\n
\u201cThe absence of large outflows or \u200cderivative maturities was helpful to the rupee on \u200bthe day but if oil keeps rising, expect it hover around 95.80 soon, unless \u2060the RBI stands firmly in the way,\u201d a trader at a private bank said.<\/p>\n
The central bank\u2019s frequent interventions \u200cover recent sessions have kept volatility expectations on the dollar-rupee pair in check, despite renewed worries about conflict in the Middle East.<\/p>\n
The dollar-rupee\u2019s 1-month implied volatility, a gauge of future expectations, fell to 4.6% on Tuesday, its lowest level since late June. Traders reckon \u200cthis reflects market expectations that the central bank will not \u200ballow sharp moves.<\/p>\n
In addition to developments in the Middle East, focus this week is on \u2060consumer inflation data for India and the U.S., both due \u2060on Wednesday.<\/p>\n
\u201cIf Brent crude prices stabilise around $70-100 per barrel, it reduces the geopolitical tail risks \u200caround the U.S.-Iran conflict and keeps the FX market highly data-dependent,\u201d analysts at DBS said in a \u200bnote.<\/p>\n
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