Rupee Recovery at Risk as Oil Volatility and Fed Uncertainty Loom

The Indian rupee's recent recovery may stall due to volatile crude prices and uncertainty surrounding the Federal Reserve's rate decision. The rupee has been supported by potential intervention from the Reserve Bank of India, which traders expect will continue.

Oil prices have whipsawed on the U.S.-Israeli war on Iran, with Brent crude trading near $87.50 per barrel after a 4.8% drop to $82.50. The RBI's presence is seen as a key tailwind for the rupee, particularly after its recent practice of stepping in ahead of or around market open.

Markets expect the Fed to hold rates unchanged, but there's a 30% chance of a 25-basis-point hike. Financial services firm Ebury's head of market strategy, Matthew Ryan, believes the Fed will have no choice but to strike a hawkish note amid ongoing U.S.-Iran conflict.