Rupee extends rally, forward premiums slump as oil dives on ceasefire

The Indian rupee gained for the fourth consecutive session on Wednesday, while forward premiums declined as a plunge in oil prices after the U.S.-Iran ceasefire supported global risk appetite.

The rupee ended at 92.58 per U.S. dollar, up 0.5% from its close of 93.0075 on Tuesday. The currency opened stronger at 92.64 and briefly ‌moved above 92.50 ⁠during ⁠the session. The currency has gained 2.4% so far in April.

The one‑year implied rate on the ​dollar/rupee forward fell 22 basis points to 3.08%.

The benchmark Brent crude contract tumbled nearly 14% ​after Iran and the U.S. agreed to a two-week ceasefire and the reopening of the Strait of Hormuz, boosting the rupee and other Asian currencies.

Israel ​also backed the pause on Iran strikes and the ⁠ceasefire helped ‌revive investor appetite for risk assets, with Indian equities ​jumping nearly 4%.

The ​ceasefire brought major relief to global markets, which in recent ⁠weeks, grappled with uncertainty over how long the conflict could ​drag on and the potential impact on inflation and ​growth.

"With improved risk sentiments in the market, the rupee is likely to trade with an appreciation bias in the near-term in the range of 92-93. From a medium-term perspective, we still do anticipate the rupee to depreciate through FY27 and see a move towards a range of 94-96 by year-end," HDFC ‌Bank said in a note.

RBI COMFORT

The currency showed little reaction to the Reserve Bank of India's policy decision on Wednesday, which was largely in line with market ⁠expectations.

Governor Sanjay Malhotra said recent curbs on banks' foreign exchange positions and restrictions barring lenders from offering non‑deliverable forwards were aimed at reining in rupee volatility ​and will not remain in place indefinitely.

He added that the RBI had observed heightened volatility in the FX market in recent weeks, with arbitrage trades by banks contributing to price swings, but noted that the measures were a reaction to specific market movements and did not signal any structural change.