- Indian Rupee (INR) rises for a fourth day
- RBI bans banks from offering non-deliverable derivatives on the Rupee
- The US Dollar (USD) is rising versus its major peers
- Trump raises concerns of Iran war escalations
The US dollar-to-Indian rupee (USD/INR) exchange rate is falling for a fourth straight day. The pair fell -0.28% in the previous day, settling on Wednesday at 93.22. At 18:30 UTC on Thursday, the pair is down 0.30% to 92.94 and trades between 92.84 and 93.65.
The Indian rupee is falling again on Thursday after India banned banks from offering a popular instrument used to trade the rupee offshore, in another attempt to support its tumbling currency.
The Reserve Bank of India (RBI) has prohibited banks from offering non-deliverable derivatives on the rupee, marking its second policy intervention this week.
The new restrictions, announced late on Wednesday, prevent banks from offering derivatives such as forwards or CFDs that can replicate a rupee position but are settled in another currency, such as US dollars.
In effect, this makes it increasingly difficult to place speculative bets on the direction of the rupee through India’s financial system.
The latest move reflects the RBI’s growing efforts to stabilise the currency after the oil price shock caused by the Iran war pushed the rupee to multiple record lows.
India remains particularly vulnerable to rising oil prices given its status as a major net energy importer, meaning the conflict has created a direct external pressure point for the currency.
The US dollar is falling against the Rupee but rising against its major peers. The US Dollar Index, which measures the currency against a basket of major peers, is up 0.30% at 99.94, after two days of losses.
The US dollar is lower against the rupee today but is rising versus its major peers following President Trump’s address to the nation yesterday, which reignited concerns over a possible escalation in the Middle East conflict.
Trump said he expects the war to continue for another two to three weeks, while also warning of very aggressive attacks on Iran in the meantime.
There was also no mention of the Strait of Hormuz, which helped send oil prices sharply higher and pushed Treasury yields up as markets reassessed the inflation outlook and the likelihood that the Federal Reserve may keep interest rates higher for longer.
The US dollar is benefiting from both higher yields and renewed safe-haven demand.
Attention now turns to tomorrow’s nonfarm payrolls report, which is expected to show that job creation rebounded to 48,000 in March, after the US economy lost 92,000 jobs in February.
That report will be closely watched, as it could shape expectations around whether the Fed remains focused primarily on inflation risks or starts to respond more actively to signs of a weakening labour market.