Rupee Falls Despite Lower Oil Prices as US Dollar Strengthens

The Indian Rupee (INR) has declined against the US Dollar (USD) despite lower oil prices. The USD/INR pair rose to near 95.50 from its 10-day low of 95.40 on Tuesday. Lower oil prices are typically positive for currencies like the INR, which relies heavily on oil imports.

The rebound in the US Dollar on Wednesday was due to a stronger-than-expected Personal Consumption Expenditure (PCE) Price Index report for July. The PCE inflation accelerated at a faster pace than expected, growing 3.7% year-over-year (YoY). This is expected to keep fears of Federal Reserve interest rate hikes intact.

The next major trigger for global financial markets will be the Jackson Hole Symposium, where Fed Chairman Kevin Warsh is set to speak on Friday, August 28. Strategists at DBS flag this event as 'the most important' but stress that it's being viewed more as a credibility event rather than a rate-signalling one.

The confirmation of an agreement between Iran and Oman on the Strait of Hormuz has weighed on oil prices. However, the IRGC clarified that reopening the Strait will take more than just a deal with Oman.