The Indian rupee was on the defensive yet again on Tuesday as oil prices continued to march higher amid dwindling hopes of a near-term resolution to the two-month long U.S.-Iran war, which has disrupted global energy supplies.
The rupee dipped to 94.47 per dollar, down 0.3% on the day and tracking declines in oil-sensitive peers including the Thai baht, Philippine peso and Indonesian rupiah.
Brent crude oil futures were hovering just shy of $110 per barrel, after a U.S. official said that President Donald Trump is unhappy with the latest Iranian proposal on resolving war.
This leaves the conflict in a stalemate with the flow of energy and other supplies through the critical Strait of Hormuz largely stalled.
Traders and analysts expect the rupee to remain pressured until normalcy in energy flows is restored, which would also help alleviate concerns over risks to India's growth-inflation balance.
Meanwhile, the Reserve Bank of India is expected to keep intervening in the market to prevent excessive volatility. On Tuesday, state-run banks were spotted offering dollars near the rupee's intraday lows, two traders said.
"The 93.50-93.80 zone remains a strong demand base, where dips (on USD/INR) can get absorbed, while 94.50-94.80 is expected to act as a resistance zone," said Amit Pabari, managing director at FX advisory firm CR Forex.
Elsewhere, the Bank of Japan kept benchmark interest rates unchanged as expected, but three of the nine-member board proposed hiking borrowing costs, signalling policymakers' concerns over inflationary pressures from the Middle East conflict.
The yen nudged up against the dollar after the announcement of the decision. Against a basket of peers, though, the dollar was steady at 98.5
Investors now await monetary policy decisions from other major central banks and key corporate earnings both locally and overseas.
Source Name : Economic Times