Rupee Opens Flat Against US Dollar As Israel-Iran Reach Impasse

The Indian rupee opened flat against the US dollar on Tuesday, trading at 86.07, according to Bloomberg.

Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, noted that the rupee is expected to trade within the range of 85.75 to 86.30 for the day.

He advised exporters to hedge near the 86.25 mark, while importers might consider waiting before hedging their positions.

Brent oil prices have risen to $74.04 per barrel following a warning from the US president regarding the Israel-Iran conflict, which has heightened concerns about potential supply disruptions.

Conflicting reports about Iran seeking a ceasefire, along with soft economic data from China, have also impacted oil prices. Brent oil was at $73.75 per barrel, up from a low of $72.29 per barrel yesterday.

The dollar index moved back to 98.21, with the Euro trading at 1.1553 and GBP at 1.3566, after rising to almost 1.16 and 1.36, respectively yesterday. Bhansali highlighted that the US has sent an aircraft refiller to the Gulf, although the White House stated that the US is not directly involved in the conflict.

The Bank of Japan is set to announce its policy rates, with expectations that rates will remain constant, Bhansali said. However, the BOJ may announce a slowing reduction in bond purchases next year under a quantitative tightening plan to avoid major market disruptions amid growing economic uncertainties, he added.

The Indian rupee had risen to 85.75 on Monday after market hours in the non-deliverable forward market, as Iran discussed a ceasefire, Bhansali said.

However, following comments from Trump about evacuating Tehran, the rupee fell back to 86.12. Bhansali mentioned that if the rupee closes above 86.20 on Tuesday or any day, importers may face a stop loss as the dollar could rise to 86.70.

The presence of the Reserve Bank of India selling dollars above 86.20 has helped keep the rupee steady.

Oil prices remain a key factor for the rupee, as foreign portfolio investors and oil companies continue to buy dollars to fund their respective outflows. Tuesday's trading range will largely depend on the progression of the conflict and the actions of the RBI in the market, Bhansali said.