The Indian rupee depreciated on Wednesday, mirroring losses in other Asian currencies affected by oil prices, as energy costs stayed elevated due to ongoing uncertainties surrounding the conflict involving Iran, even with an extended ceasefire in place. The currency hit an intraday low of 93.8450 against the dollar, its lowest since March 30, before rebounding modestly to 93.75, marking a 0.3% drop from its prior close. Traders attributed the contained decline to probable dollar-selling actions by the Reserve Bank of India. This intervention comes after a partial reversal of regulations that had supported the rupee. Other oil-dependent Asian currencies, including the Philippine peso and Indonesian rupiah, also weakened following a 3% increase in oil prices to above $98 per barrel. Although the United States declared an extension of the ceasefire, it plans to maintain a naval blockade on Iran’s maritime trade, which Iran views as an act of aggression. Analysts from DBS noted in a report that market volatility may increase as parties seek negotiating advantages, but any dollar strengthening should remain limited since a return to full conflict appears improbable currently. Regional stock markets faced downward pressure, with MSCI’s Asia-Pacific index dropping 0.7% and India’s Nifty 50 falling 0.8%. Forward premiums for dollar-rupee trades rose, with the one-year implied yield increasing by 3 basis points to 3.13%. Market participants observed greater demand for hedging among importers in the domestic market, while exporters showed interest in selling dollars via non-deliverable forwards. However, banks are approaching non-deliverable forward contracts with caution after the central bank’s recent measures against arbitrage between local and offshore markets.
