Rupee Under Pressure, Set To Open Weaker Today After Oil Resumes Rally On Iran Tanker Attack

The Indian rupee is set to open weaker on Thursday with crude oil prices resuming their climb, keeping up the pressure on the Asian nation's terms of trade and currency. The 1-month non-deliverable forward indicated the rupee is likely to open in the 92.18-92.22 range versus the U.S. dollar, having settled at 92.04 on Wednesday. Oil prices climbed on Thursday after Iraqi security officials said Iranian explosive-laden boats had hit two fuel oil tankers, adding to supply disruption fears stemming from the U.S.-Israeli war with Iran. Brent crude jumped 7.3% to $98.60 a barrel, with the tanker attack overshadowing relief after the International Energy Agency agreed to release a record 400 million barrels of oil to help rein in prices.

With no signs of de-escalation in the Persian Gulf, disruptions to oil flows through the Strait of Hormuz are likely to persist, ING Bank said in a note.

Oil prices have swung wildly this week, moving between roughly $81 and $120 a barrel amid rapidly shifting headlines on the war.

There was relief after U.S. President Donald Trump indicated a de-escalation in the Iran war and markets began pricing in the possibility of strategic reserve releases to cap the rally. The attack on fuel oil tankers has revived fears of supply disruptions, underscoring the fragility of that relief.

"With oil swinging like this, the rupee will remain vulnerable," a currency trader at a private bank said.

"Expectations are that the RBI will step in to keep the pace of the rupee’s decline orderly, not necessarily to stop the move altogether."

The Reserve Bank of India has been actively intervening in the foreign exchange market in recent sessions, traders said, selling dollars to curb pressure from the choppy oil prices. (Reporting by Nimesh Vora; Editing by Harikrishnan Nair)