Rupee markets navigate partial RBI rollback, US‑Iran risks simmer

MUMBAI, April 21 (Reuters) – The Indian rupee is expected to open largely unchanged on Tuesday, with traders assessing the impact of the central ​bank’s partial rollback of FX curbs alongside looming U.S.-Iran ‌risks.

The rupee will open in the 93.08-93.14 range versus the U.S. dollar, per traders, having weakened 0.2% to 93.1275 on Monday.

The Reserve Bank of India, after ​market hours on Monday, partially rolled back restrictions it had imposed ​on corporates and other users and on certain related-party ⁠transactions undertaken by banks.

The RBI withdrew directions barring banks from offering non-deliverable forwards ​to resident and non‑resident users and dropped curbs that prevented users from rebooking foreign ​exchange derivative contracts.

The restrictions were introduced about three weeks ago, primarily to prevent corporates from engaging in arbitrage between onshore and offshore markets. That move, coupled with prior measures to cap the onshore ​position size of banks, helped the rupee recover from a all-time ​low of 95.21 hit in late March.

On balance, the RBI’s rollback is likely to ‌put ⁠a bit of pressure on the rupee and push premiums higher at the margin, a treasury official at a foreign bank said.

“After all that has transpired, it is difficult to gauge how banks will ​respond, particularly whether ​they will allow ⁠corporates to undertake NDF trades,” he said.

The rupee and other Asian currencies will have to contend ​with uncertainty over whether a second round of U.S.‑Iran ​talks ⁠will take place, with the deadline for the two‑week ceasefire set to lapse this week.

Asian equities were mostly higher on Tuesday, tracking U.S. equity futures.

“Markets are currently priced ⁠for ​de-escalation,” MUFG Bank said in a note.

“Any ​escalation, particularly military action around Hormuz, could trigger a renewed spike in oil prices ​and a broad risk-off move.”