Indian rupee to hold above 86 as safe haven premium in dollar erodes
MUMBAI: The Indian rupee is expected to open higher on Wednesday, sustaining its rally past the 86 level, supported by a fall in demand for the safe-haven dollar and upbeat risk appetite following the Israel-Iran ceasefire.
The 1-month non-deliverable forward indicated an open in the 85.92-85.96 range, versus 85.9750 in the previous session. The rupee rallied 0.9% on Tuesday, logging its best single-day performance in a month.
Brent crude declined 13.2% over the last two days following the ceasefire, and the dollar index had declined by 0.9%.
Investors pared long dollar positions, unwinding bets built up during the 12-day conflict between the two countries.
'The market is unwinding risk-off trades now that it looks like the conflict won't escalate further,' said a currency trader at a Mumbai-based bank.
'We're seeing better offers (on USD/INR) and light exporter selling. Speculators have been taking to (USD/INR) shorts.'
Indian rupee set to rally as crude dives on Israel-Iran de-escalation
With the Middle East risk premium deflating, attention has shifted back to the weakening U.S. exceptionalism narrative — a key driver behind the dollar index's nearly 10% slide so far this year.
Analysts say the dollar's trajectory from here will hinge on how U.S. tariff negotiations unfold and whether Washington can strike trade deals with key partners. Another major driver will be how the U.S. economy holds up amid policy uncertainty and the timing and scale of U.S. Federal Reserve rate cuts.
Fed Chair Jerome Powell stuck to his cautious approach and reiterated that the central bank was in no rush to cut rates at his semi-annual testimony to Congress on Tuesday.
Markets continue to price a low probability of rate cut next month.
'Overall, Chair Powell continued to stress the high level of uncertainty and need for additional data.. the testimony did little to change the overall policy trajectory,' Morgan Stanley said in a note.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
3 hours ago
- Business Recorder
Chicago soy rises on oil rebound; wheat, corn fall on ample supply outlook
BEIJING: Chicago soybean and soyoil futures edged higher on Wednesday, supported by a rebound in oil prices as investors monitored the fragile ceasefire between Iran and Israel. The most-active soybean contract rose 0.24% to $10.39-4/8 per bushel after three straight sessions of losses. Soyoil gained 0.78% to 53.02 cents per pound. 'Soybean and soyoil are taking a breather as they overshot a bit to the downside,' said Ole Houe, head of advisory services at IKON Commodities in Sydney. Oil prices edged higher after plummeting in the last two sessions, underpinning soyoil, which often tracks crude because it is used in biofuel as a substitute for fossil fuel. 'The crude oil market has stabilised at levels marginally higher than before the Israel-Iran war so that has given some confidence we don't need to slide too much for now,' Houe said. Warm, rainy weather in the US Midwest is expected to aid crop development in the coming days, according to forecasters. Corn eased 0.06% to $4.16 a bushel, hovering near this year's lowest level, as benign weather across the US Corn Belt and strong global crop prospects pressured prices. In Brazil, farmers are estimated to produce a record 123.3 million metric tons of second corn, agribusiness consultancy Agroconsult said on Tuesday. China's May soybean imports from Brazil jump Second corn, which Brazilian farmers are harvesting now, will account for about 80% of national output this year. It is mainly exported in the second half, competing with US corn suppliers on global markets. Wheat slid 0.45% to $5.49-4/8 a bushel, weighed by a strong production outlook across the northern hemisphere and accelerating harvest activity. Argus Media raised its forecast for Russia's 2025-26 wheat output to 84.8 million tons, up from 81.3 million tons a year ago.
Business Recorder
3 hours ago
- Business Recorder
Copper edges higher on softer dollar, tentative Middle East truce
SINGAPORE: Copper prices on the London Metal Exchange and the Shanghai Futures Exchange edged higher on Wednesday, supported by a softer dollar and improved risk sentiment amid a tentative ceasefire between Iran and Israel. Three-month copper on the London Metal Exchange was up 0.18% at $9,686 per metric ton, as of 0101 GMT, while the most-traded copper contract on the Shanghai Futures Exchange held steady at 78,480 yuan ($10,945.45) a ton. The shaky truce has so far held, although Israel says it will respond forcefully to Iranian missile strikes that came after US President Donald Trump had announced an end to the hostilities. 'Traders and investors are waiting for some definite signals amid all the uncertainty, the Israel-Iran ceasefire may not be final, and US Federal Reserve Chair Jerome Powell's remarks on the interest rate cut have been neutral in tone,' a Beijing-based metals analyst from a futures company said on condition of anonymity. In addition, US airstrikes did not destroy Iran's nuclear capability and only set it back by a few months, according to a preliminary US intelligence assessment. The dollar weakened even after Powell said in testimony before the US Congress that he and many at the Fed expect inflation to start accelerating soon, and that the central bank was currently in no rush to ease borrowing costs. Copper gains on dollar dip but geopolitical, tariff uncertainty linger A softer US currency makes dollar-priced metals more attractive for buyers using other currencies. LME aluminium extended losses for a second consecutive day, down 0.52% at $2,565.5 a ton, and SHFE aluminium eased for the fifth day, down 0.34% at 20,260 yuan. LME zinc gained 0.26% to $2,688.5, lead grew 0.15% to $2,022, and nickel inched up 0.1% to $14,935. SHFE lead rose 0.95% to 17,090 yuan, nickel gained 0.42% to 117,720 yuan, while tin slipped 0.36% to 262,240 yuan.
Business Recorder
3 hours ago
- Business Recorder
Oil prices rise as investors assess Iran-Israel ceasefire
Oil prices climbed on Wednesday as investors assessed the stability of a ceasefire between Iran and Israel, but held near multi-week lows on the prospect that crude oil flows would not be disrupted. Brent crude futures rose 85 cents, or 1.3%, to $67.99 a barrel at 0341 GMT, while US West Texas Intermediate (WTI) crude gained 87 cents, or 1.4%, to $65.24. Brent settled on Tuesday at its lowest since June 10 and WTI since June 5, both before Israel launched a surprise attack on key Iranian military and nuclear facilities on June 13. Prices had rallied to five-month highs after the US attacked Iran's nuclear facilities over the weekend. 'Global energy prices are moderating following the Israel-Iran ceasefire. The base case for our oil strategists remains anchored by fundamentals, which indicate sufficient global oil supply,' said JP Morgan analysts in a client note. US airstrikes did not destroy Iran's nuclear capability and only set it back by a few months, according to a preliminary US intelligence assessment, as a shaky ceasefire brokered by US President Donald Trump took hold between Iran and Israel. Earlier on Tuesday, both Iran and Israel signalled that the air war between the two nations had ended, at least for now, after Trump publicly scolded them for violating a ceasefire. As the two countries lifted civilian restrictions after 12 days of war - which the US joined with an attack on Iran's uranium-enrichment facilities - each sought to claim victory. Oil prices drop 6pc 'The Israel-Iran ceasefire is likely to prove fragile. But so long as both parties show themselves unwilling to attack export-related energy infrastructure and/or disrupt shipping flows through the Strait of Hormuz, we expect bearish fundamentals in the oil market to continue … from here,' said Capital Economics chief climate and commodities economist David Oxley. Direct US involvement in the war had investors worried about the Strait of Hormuz, a narrow waterway between Iran and Oman, through which between 18 million and 19 million barrels per day (bpd) of crude oil and fuel flow, nearly a fifth of global consumption. Investors awaited US government data on domestic crude and fuel stockpiles due on Wednesday. Industry data showed US crude inventories fell by 4.23 million barrels in the week ended June 20, market sources said, citing American Petroleum Institute figures on Tuesday.
