FX.co ★ Indian Rupee Rebounds on Softer Oil Prices

The Indian rupee appreciated to 86 per USD, recovering significantly from its three-month low of 87 observed on June 23rd. This resurgence is attributed to indications of reduced geopolitical tensions in the Middle East, which have defused concerns regarding capital outflows from India and bolstered emerging market currencies. Notably, Israel and Iran have thus far avoided retaliatory actions following their most recent exchanges, and the United States has expressed a willingness to broker a ceasefire. Moreover, the uninterrupted passage of tankers through the Strait of Hormuz during the conflict caused a decline in oil prices, thereby reducing the amount of rupees Indian refiners and distributors need to exchange in order to import energy, thus providing support to the currency. On the monetary policy front, the Reserve Bank of India (RBI) is anticipated to maintain its strategy of reducing interest rates, as the latest inflation figures have decreased more than expected to a six-year low. The central bank has already implemented three successive rate cuts following a year of maintaining rates at the over-four-year peak of 6.5%.