Oil woes push Indian rupee to over one-week low, RBI caps fall near 96/USD

Business Recorder reported that the Indian rupee slipped to its weakest point in over a week on Monday as crude prices climbed. Dollar sales by state-run banks, which were most likely carried out for the Reserve Bank of India, limited the decline, and the rupee settled 0.2% lower at 95.9825 to the dollar. Brent crude jumped close to 4% to $108.2 a barrel after US President Donald Trump rejected Iran's peace proposal, although he told Axios he expected negotiators to hold more talks this week.

Selling pressure lifted bond yields and pulled equities down, with Mumbai shares losing close to 1.5% and hitting their lowest point since April. An MSCI gauge of Asian stocks also slipped almost 1%. India sources close to 90% of its crude abroad, placing the rupee among the world's most exposed to Middle East oil shocks.

Goldman Sachs analysts said some investors are outright bearish on high-yield Asian currencies given their exposure to higher energy costs. Goldman also sees the RBI able to keep the rupee in a 94 to 97 range, or at least slow its depreciation. Policy-driven inflows of $143.6 billion between June 8 and September 18 give the central bank room to lean against the fall. A foreign bank trader called 96 the floor for the rupee and said the RBI seems unlikely to allow a move past it.