Indian Rupee falls further as US-Iran tit-for-tat strikes boost oil prices
The Indian Rupee (INR) extends its decline against the US Dollar (USD) on Wednesday after a sharp correction the previous day. The USD/INR pair jumps marginally above 95.00 as surging energy prices have battered the Indian currency significantly.
The Indian Rupee (INR) continued to falter against the US Dollar (USD) on Wednesday, following a significant correction the day before. The USD/INR pair rose slightly above 95.00, driven by soaring energy prices, which have severely weakened the Indian currency. MCX Crude Oil, set to expire on September 21, surged by more than 2% to approach Rs.
8,920. Currencies from nations such as India, which rely heavily on oil imports, typically underperform in a high-oil-price scenario. Escalating tit-for-tat attacks between the US and Iran have fueled concerns of a prolonged energy supply disruption. Earlier, Iran's Islamic Revolutionary Guard Corps (IRGC) carried out missile strikes on the Al Azraq air base in Jordan, housing US military personnel and aircraft, in response to US Central Command (CENTCOM) repeatedly bombing Iranian tankers in the Gulf of Oman.
The recent drop in the number of cargo vessels passing through the Strait of Hormuz, from eight to seven on September 7, compared to an average of 130-140 before the Middle East conflict, has further exacerbated the situation. The Reserve Bank of India (RBI) may intervene discreetly through spot and Non-Deliverable Forward (NDF) markets to counter the weakening rupee.
This week, the key catalyst for the USD/INR pair is the US Consumer Price Index (CPI) data for August, expected to be released on Friday. The data is anticipated to have a significant impact on the US interest rate outlook.
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