Indian Rupee Falls as Oil Prices Rebound Amid Middle East Tensions
The Indian Rupee (INR) lost its three-day winning streak against the US Dollar (USD), trading marginally lower on Wednesday. The sharp recovery in oil prices, which rose by 4.3% to around Rs. 7,930 on the MCX Crude Oil contract expiring on August 19, weighed heavily on the INR.
The increase in oil prices poses a significant threat to the INR, as India imports approximately 85% of its energy needs. Higher oil prices lead to increased foreign outflows from reserves, which further weakens the currency.
The recent exchange of attacks between US and Saudi forces targeting Iran-backed groups has heightened concerns about the prolonged closure of the Strait of Hormuz, a vital passage for nearly 20% of global energy supply. The announcement by the Iranian Islamic Revolutionary Guard Corps that three oil tankers were 'struck and stopped' further exacerbates the situation.
The Federal Reserve's (Fed) monetary policy decision is scheduled to be announced later today at 18:00 GMT, with a 69.5% chance of leaving interest rates unchanged in the range of 3.50%-3.75%. The US Dollar Index (DXY), which measures the Greenback's value against six major currencies, trades 0.13% lower to near 101.25.