Rupee slides to 95.22 as $115 oil and a looming Fed decision squeeze India
The Indian rupee closed at 95.2200 per dollar on Wednesday, weaker than the previous session's 95.1150, as Brent crude climbed more than 1% to $115.3 a barrel following an attack on a refinery in Saudi Arabia, the world's top crude exporter.
The central bank likely intervened to contain the currency's weakness, according to Token Times, while options markets show a widening skew towards bets on further rupee declines. "The direction of travel yet again seems to have turned decisively higher on the dollar-rupee," a trader at a state-run bank said.
Oil's path hinges on diplomacy. Qatari mediators handed Iran a new draft deal on Sunday to end the US-Israeli war on the country, an official briefed on the negotiations said, with Tehran expected to respond by the end of the week. An interim peace agreement in June unravelled quickly, and the renewed supply worry has hardened bearish sentiment towards the rupee.
Attention now turns to the Federal Reserve, which announces its decision at 1800 GMT and is widely expected to hold its benchmark rate. Traders price an 84% probability of a hike in December, according to CME's FedWatch Tool. ING said it suspects Chair Warsh "will not want to tie himself in knots by citing a tightening in financial conditions", adding that a focus on restoring monetary stability should keep the dollar supported.
