Rupee Loses 4 Paise Against Dollar, Brent Crude Remains a Market Concern

Indian Rupee Falls to All-Time Low Amid Ongoing Tensions with Iran

The Indian rupee opened four paise lower on May 4, as traders remained cautious despite a slight dip in Brent crude prices over the weekend. US President Donald Trump's statement that America would guide stranded ships out of the Strait of Hormuz failed to alleviate concerns, and the rupee continued its downward trend.

The rupee was trading at 94.95 a dollar after ending the previous session at 94.91. This marks a significant decline from the rupee's all-time low of 95.33 on April 30, when Brent crude briefly hit a $120 a barrel. The currency and fixed income markets were closed on May 1, allowing the rupee to recover slightly.

However, the rupee has remained under pressure in recent sessions, sliding nearly 2 percent over the past eight trading days, according to Reuters. This sustained weakness is largely attributed to a feedback loop from high oil prices, which has eroded sentiment, prompted heavier hedging by importers, and reinforced steady dollar demand from oil refiners.

Read also: FirstClub Secures $55 Million in Funding from Peak XV, Sofina, and Other Investors 9 Months After $22 Million Series A Round

The benchmark Brent crude price is currently trading at near $108, with the Brent crude oil futures contract having rolled over to the July contract. Trump's statement about guiding neutral ships through the Strait of Hormuz may ease supply concerns slightly, but the lack of progress on a peace plan between the US and Iran has kept traders on the sidelines.

Domestically, the Reserve Bank of India (RBI) likely intervened in the market after the rupee hit an all-time low and will likely keep the rupee under check from any further free-fall, according to traders. Higher Brent crude prices are detrimental to the country's import bill and current account deficit, putting further pressure on the rupee.

The rupee is currently standing at a critical zone, both technically and psychologically. The 95.20-95.30 range is expected to act as a strong resistance in the near term.

Read also: RBI Policy Preview: A Cautionary Wait Ahead