The rupee rose against the US dollar for the second straight session on Monday, supported by a sharp decline in crude oil prices after a preliminary agreement between the United States and Iran to end the conflict and reopen the Strait of Hormuz, Reuters reported.The currency also extended gains seen after actions taken by the Reserve Bank of India on June 5 to attract dollar inflows, when the central bank left interest rates unchanged and maintained its “neutral” policy stance.The rupee settled at 94.71 against the dollar, up 0.4% from the previous close at 95.11. During the session, it touched 94.4625, its strongest level in five weeks.The currency’s decline against the dollar so far this year has reduced to 5.6%, after hitting a record low of about $97 to the dollar last month.Traders said lower oil prices and the prospect of increased dollar inflows could provide support to the rupee in the near term.Victor Roy, head of treasury at CTBC Bank, said, quoted by Reuters, “The news of the end of the war is a positive development for the currency, but we may not see a rise in one direction and the currency may move towards 93.25 in the near term.”Brent crude fell more than five percent to about $83 a barrel on Monday, providing relief to India, which imports nearly 90 percent of its crude oil needs.
Economists have also raised their forecasts for India’s balance of payments in the wake of the measures taken by the Reserve Bank of India, and many now expect a small surplus instead of the large deficit they had expected earlier.The pace of any further appreciation in the rupee could depend on the Reserve Bank of India’s willingness to allow gains, as the central bank may use currency strength to trim its large foreign exchange positions, traders said.The RBI’s short dollar positions in the foreign exchange market rose to a record $104 billion in March, highlighting its efforts to support the rupee.