Rupee Opens Weaker Against US Dollar As Israel-Iran Conflict Escalates
Rupee's range for the day is expected to be between 86.00 and 86.60.
The Indian rupee opened 11 paise weaker against the US dollar on Wednesday, trading at 86.35 compared to its previous close of 86.24 on Tuesday. The ongoing conflict in the Middle East has significantly impacted global markets, contributing to the rupee's depreciation.
Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, provided insights on the day's trading range and strategic advice for exporters and importers. "The range for the day is expected to be between 86.00 and 86.60. Exporters should consider hedging near 86.50/60, while importers may wait for better hedging opportunities," Bhansali advised.
The conflict has also driven up Brent oil prices, which rose to $86.38 per barrel following a warning from US President Donald Trump for Iran to surrender or face consequences. The prices had previously surged to $77.33 as the Israel-Iran conflict heightened fears of supply disruptions. Industry data showing a significant drawdown in US inventories further supported the price increase. "Prices remained close to the five-month high hit last week as the conflict entered its sixth day. President Trump's comments underscored the US' direct involvement, with fighter aircraft being sent to the Middle East and a refueling ship stationed in the region," Bhansali explained.
Global markets have reacted to the escalating conflict, with the Dow Jones falling 0.70% overnight. In contrast, the Nikkei rose by 0.72% this morning due to a falling yen, while the Hang Seng and Chinese markets were down by 1.20% and 0.30%, respectively. The Gift Nifty showed a 33-point uptick in pre-opening trading. Among currencies, the Chinese yuan fell to 7.1906, the Indonesian rupiah (IDR) to 16,324, and the South Korean Won to 1,373.
Bhansali also noted the potential movement of the rupee based on recent trends. "As indicated in our yesterday's bulletin, the rupee, once it closes above 86.20, could move up to 86.70. Today, the rupee is opening at 86.38, and unless the RBI intervenes, it can move towards 86.60 levels. Exporters need to continue selling as once the war ends, the rupee can go back to 85.50 levels. Importers should wait for a correction to buy dollars and can use forward contracts booked in the meantime," he added.
