Rupee Drops 10 Paise to 94.71 Against Dollar Amid Ongoing US-Iran Tensions

Rupee Opens Lower on May 7, Amid Uncertainty Over US-Iran Peace Deal

The Indian rupee opened 10 paise lower on May 7, as Brent crude prices inched up to over $100 a barrel due to uncertainty prevailing over the latest US-Iran peace push. The currency opened at 94.71 against the dollar after ending the previous session at 94.61, a rise of nearly 0.6 percent, one of the sharpest increases in about a month.

Brent Crude Prices Recover Slightly

Brent crude prices recovered slightly early in the day to trade near $102 a barrel, but were still near a two-week low. Crude slipped nearly 8 percent in the previous day on reports that the United States and Iran were nearing a peace deal, but recovered after US President Donald Trump said it was "too soon" for face-to-face talks with Tehran. Market participants are now focused on the critical 48-hour window during which the US expects Tehran's formal response.

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Pressure on the Rupee

The rupee is constantly under pressure from importers as they look to hedge their positions, while the Reserve Bank of India (RBI) is keen on preventing a sharp fall in the currency, according to traders. Bankers cautioned that crude has recovered from its lows, while uncertainty over US-Iran optimism translating into a breakthrough is likely to cap the rupee's upside.

Market Expectations

A "large part" of the optimism around a potential US-Iran deal was priced in the previous day, a currency trader at a private sector bank said. From here, it's about incremental headlines, he stated. Oil near $100 is "still too high", and for the rupee to see sustained relief, that would need to be corrected, the trader noted.

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