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The rupee is under pressure following the oil rally after the Iran tanker attack

The rupee is under pressure following the oil rally after the Iran tanker attack
The rupee is under pressure following the oil rally after the Iran tanker attack

The Indian rupee will open lower?on?Thursday as crude oil prices resume their climb. This will continue to put pressure on the Asian nation's terms-of-trade and currency. The 1-month forward non-deliverable?indicates?that the rupee will likely open between 92.18 and 92.22 against the U.S. Dollar, after having settled at 92.04 Wednesday. Iraqi officials reported that Iranian explosive-laden ships had struck two fuel oil 'tankers. This fueled fears of a supply disruption resulting from the U.S./Israeli war against Iran. Brent crude rose 7.3% to $98.60 per barrel after Iraqi security officials said Iranian explosive-laden boats had hit two fuel oil?tankers. The tanker attack was overshadowed by relief that the International Energy Agency (IEA) agreed to release 400 million barrels to help control prices.

ING Bank stated in a recent note that disruptions in oil flows through the 'Strait of Hormuz' are likely to continue as long as there is no sign of de-escalation.

The oil price has been fluctuating wildly in the past week. It ranged from $81 to $120 per barrel, despite rapidly changing headlines about the war.

After U.S. president Donald Trump announced a deescalation of the?Iran war, markets began pricing the possibility that strategic reserves could be released to cap the rally. The attack on fuel tankers has revived concerns about supply disruptions. This highlights the fragility of this relief.

A currency trader at a private bank stated that "with oil swinging this way, the rupee would remain vulnerable."

"It is expected that the RBI will intervene to maintain the rate of decline in the rupee, but not necessarily halt the movement."

Traders said that the Reserve Bank of India (RBI) has actively intervened in the foreign exchange markets in recent sessions. They have sold dollars to reduce the pressure caused by the fluctuating oil prices. (Reporting and editing by Harikrishnan Nair; Reporting by Nimesh Vora)

(source: Reuters)