A sharp fall in crude oil prices and improving global risk appetite may help the rupee recover on Tuesday after it slid to a record low on Monday.
On Monday, the currency had weakened 0.64 percent to close at 92.3275 amid a surge in oil prices and heightened geopolitical tensions.
Crude oil prices dropped sharply after Donald Trump indicated that the war involving Iran could end sooner than expected, easing investor concerns about prolonged disruptions to global energy supplies.
Brent crude futures fell more than 10 percent on Tuesday to around $88.50 a barrel, retreating steeply from the panic high of about $119.50 touched a day earlier.
In an interview with CBS News, Trump said the military campaign against Iran was “very complete” and suggested the conflict could end much sooner than his earlier estimate of several weeks. The remarks prompted investors to scale back the geopolitical risk premium that had pushed oil prices sharply higher.
Analysts said fears of a prolonged supply disruption from the Persian Gulf have eased slightly following Trump’s comments. However, markets remain cautious.
An analyst said the decline in oil prices reflects expectations that tensions may cool, but warned that the situation could change quickly unless oil flows through the Strait of Hormuz return to normal.
Iran’s Revolutionary Guards, responding to Trump’s remarks, said Tehran would decide when the conflict ends and warned that the country could block regional oil exports if US and Israeli attacks continued.
A currency trader said the tone in markets had changed significantly from Monday. “This is still a very fluid situation,” the trader said, adding that traders are likely to keep positions light given the risk of sharp moves driven by developments in the conflict.
