Indian rupee snaps eight-day rally as oil climbs to highest since May
The Indian rupee snapped an eight-session winning streak on Thursday, closing down 0.4% at 94.8175 per dollar, as Brent oil prices climbed to their highest since May on deepening worries about conflict in the Middle East. The currency swung from its strongest level in over six weeks to a sharp afternoon decline, with traders pointing to broad-based dollar demand locally and a risk-off move in global markets.
Earlier support had come from chunky foreign inflows for Jio Platforms' IPO and from defensive measures taken by the Reserve Bank of India. Those gains faded as oil prices climbed in the latter half of the session. MSCI's All-World index was set for its largest daily fall in two weeks, down 0.4%, with technology shares in Seoul, Tokyo, Amsterdam and Paris under pressure and US equity futures pointing to a weak start on Wall Street.
Oil has remained elevated even as Gulf flows hold up, reflecting market anxiety over the conflict. "The sizeable risk premium currently embedded in prices is unlikely to fade until clear signs of de-escalation emerge and reassure investors that regional supply will remain uninterrupted," ING said in a note. Brent was last up 3.3% at $112.40 per barrel. India imports nearly 90% of its crude requirements, making it one of the world's most vulnerable economies to the Middle East oil shock.
That exposure remains a key risk for the rupee, with market participants and observers split over how sternly the RBI should defend the currency. Senior IMF official Krishna Srinivasan said on Wednesday that India should allow the dollar-rupee exchange rate to move as the first line of defence, while former RBI deputy governor Michael Debabrata Patra told Reuters that exchange rates tend to overshoot and can cause financial stability risks.
