The Indian rupee appreciated 46 paise to open above the 95-per-US dollar mark on Wednesday, August 5, ahead of the Reserve Bank of India’s (RBI) monetary policy decision, supported by a continued decline in crude oil prices amid signs of progress in US-Iran negotiations.
The domestic currency’s recovery has been aided by Brent crude’s sharp correction from a recent high of around $102 a barrel to $78.80, along with sustained intervention by the RBI and strong capital inflows following measures announced by the central bank in its June policy review.
Crude oil prices extended their losses after Brent tumbled 5.2% on Tuesday and slipped another 1% during Asian trading. The decline came after comments from Qatari and US officials raised hopes of a diplomatic breakthrough in the five-month-long US-Iran conflict, easing concerns over supply disruptions.
According to a Reuters report, movements in crude oil prices remain one of the biggest drivers of the rupee’s near-term direction. A currency trader told Reuters that the rupee is likely to hold on to its recent gains only if oil prices remain contained.
RBI policy: Focus shifts to commentary
Market participants widely expect the Reserve Bank of India (RBI) to keep the repo rate unchanged at 5.25% in its monetary policy announcement on Wednesday. However, according to market experts, the key focus will be Governor Sanjay Malhotra’s commentary on inflation and liquidity. Analysts believe that while a status quo is largely priced in, any indication that the RBI is turning more cautious on inflation could have a greater impact on the rupee and domestic financial markets than the policy decision itself.
Falling oil prices support the rupee
According to market experts, crude oil prices provided a significant boost to the rupee after Brent crude fell nearly 6% to a three-week low of around $79 a barrel. The decline followed reports that Qatar had proposed a draft framework to reopen the Strait of Hormuz, allowing ships to enter through an Iranian route and exit via an Omani channel. Adding to the optimism, US Treasury Secretary Scott Bessent said a deal could be finalised within the next two days.
Despite the sharp fall in oil prices, experts caution that geopolitical developments remain fluid. They note that previous signs of progress in the US-Iran conflict have quickly unravelled, suggesting that the recent relief in crude prices could reverse if negotiations fail to deliver a lasting agreement.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, said, optimism around the Hormuz talks could help the rupee test its support zone of 94.80-95.00. As long as this holds, the pair may gradually drift back toward 95.80-96.20 over coming sessions. But if the Hormuz deal actually goes through, the rupee could see a sharper move of 30 to 40 paise on the stronger side.
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