Rupee weakens to 93.808 vs dollar amid Iran ceasefire extension

US President Donald Trump extended the ceasefire agreement between the United States and Iran after the earlier deal expired on Wednesday, as reported by Upstox. Trump also announced that the US defence forces will continue to blockade the key trading route, maintaining pressure on Iranian oil exports. Traders remained cautious over the US blockade and President Donald Trump's US-Iran ceasefire extension move without a pre-set timeline, according to Upstox. Even though the U.S. has announced what appears to be a unilateral ceasefire extension, President Trump has also said he would continue the U.S. Navy's blockade of Iran's trade by sea, considered an act of war by Iran, as noted by The Economic Times. Investors are bracing for a more prolonged disruption in the Strait of Hormuz as US-Iran negotiations show signs of grinding to a standstill, with markets swayed in recent days by contradictory headlines over whether or not US Vice President JD Vance has departed for Pakistan for the talks. "Volatility in markets is likely to pick up as both sides look to strengthen their leverage for negotiations, but any USD rebound should be restrained as a re-escalation into conflict remains unlikely for now," analysts at DBS said in a note, according to The Economic Times.

The Reserve Bank of India on Monday partially withdrew directives taken on April 1 to curb excessive speculation in the rupee, as reported by The Economic Times. The banking regulator had capped the net open positions in non-deliverable forward markets at USD 100 million, mandating banks to comply by April 10. Under the revised directives, authorised dealers or banks can resume offering non-deliverable derivative contracts involving INR to resident or non-resident users, but must comply with certain restrictions on related-party transactions. The $100-million cap in net open position remains effective, with the central bank having imposed restrictions after corporates began exploiting arbitrage opportunities between onshore and offshore markets. Bank treasury heads said they remain cautious and are holding back from offering non-deliverable forward (NDF) contracts to corporates, as RBI is likely monitoring such trades, as reported by The Economic Times. Despite the central bank's relaxations, Indian banks are still holding back from offering Indian rupee non-deliverable forwards to clients amid lingering worries over compliance and supervisory risks, according to The Economic Times. The intent behind the relaxation appears to be to facilitate companies with genuine hedging needs, with the central bank having imposed restrictions after corporates began exploiting arbitrage opportunities between onshore and offshore markets.

Weak domestic equity markets and continued foreign institutional investor outflows further pressured the Indian currency, according to forex traders. The 30-share Sensex was trading 362.78 points or 0.46 per cent down at 78,910.55 in early trade, while the Nifty declined 90.70 points or 0.37 per cent to 24,485.90, as reported by CNBC TV18. Foreign Institutional Investors offloaded equities worth about ₹1,918.99 crore on Tuesday, according to exchange data, indicating continued foreign investor caution despite positive market sentiment. Regional equities were under pressure on Wednesday as MSCI's gauge of Asia Pacific stocks fell 0.7% while India's benchmark Nifty 50 declined 0.8%, as reported by The Economic Times. Dollar-rupee forward premiums, which bake in the cost of hedging, drifted higher with the 1-year implied yield up 3 basis points at 3.13%, according to The Economic Times. Traders also pointed to heightened hedging appetite from importers in the onshore market while exporters were keen to sell dollars in the NDF market, as noted by The Economic Times. Three traders also pointed to intermittent dollar sales by state-run banks, which helped limit the rupee's losses, as reported by The Economic Times. Gold and silver continued their upward trend, with gold trading at ₹1,53,165 per 10 grams, up ₹1,494 and silver at ₹2,49,100 per kg, up ₹4,399. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said the rupee fell on uncertainty over US-Iran talks and a surge in crude oil prices, with traders expected to take cues from retail sales and ADP employment change data from the US. USD-INR spot price is expected to trade in a range of ₹93.30 to ₹93.90, according to Choudhary's analysis. In the near-term, oil prices and foreign portfolio flows are expected to be key drivers for the rupee, as noted by The Economic Times.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.12% lower at 98.276 as of 1:49 am (EDT) on Wednesday, April 22, compared to the previous market close, according to Bloomberg data. This relatively stable dollar performance comes amid ongoing geopolitical tensions, with traders remaining cautious about the West Asia peace agreement. The euro was down 0.44% at $1.1736, while the Japanese yen weakened 0.37% against the greenback to 159.39 per dollar. Sterling weakened 0.29% to $1.3493. Global benchmark Brent crude oil prices were trading 0.78% lower at $97.70 per barrel as of 12:25 pm on Wednesday, compared to $98.48 per bbl at the previous market session, as reported by Upstox. Asian currencies sensitive to ructions in oil prices - such as the Philippine peso and Indonesian rupiah - were weaker as well after oil prices rose 3% to over $98 per barrel, as reported by The Economic Times. Futures traders are pricing in a 30% chance the Fed makes one 25-basis-point cut this year, as noted by Reuters. Currency experts suggest ₹92.3 as immediate support and ₹92 as a stronger base, with a move above ₹93 potentially extending the upside towards ₹93.5-₹93.7 range, as reported by The Economic Times.

In a latest development, Iran's chief negotiator on Tuesday said Tehran would not negotiate in the face of threats, while US President Donald Trump hinted that he was in no rush to end the conflict with Iran, as reported by CNBC TV18. The ceasefire agreement between the United States and Iran is scheduled to expire on Wednesday, adding to market uncertainties. Amit Pabari, MD at CR Forex Advisors, noted that amid factors such as tensions between the US and Iran resurfacing; lack of clarity on the conflict; the temporary ceasefire, which expires this week, seeming fragile; and statements from both sides suggesting that the situation could swing either way, the RBI made a move on Monday that quietly shifted the domestic equation. He explained that by allowing genuine hedging flows from importers and exporters to resume, the RBI is restoring normal market function, but by keeping limits like the $100-million cap on net open positions, it is ensuring that speculative excess does not creep back in. However, with more freedom for hedging, dollar demand is likely to increase in the near term, especially from importers rushing to cover exposures, adding another layer of pressure on the rupee. Currency experts suggest ₹92.3 as immediate support and ₹92 as a stronger base, with a move above ₹93 potentially extending the upside towards ₹93.5-₹93.7 range, as reported by The Economic Times. Radhika Rao, senior economist at DBS, noted that "the decision to ease some of the measures appears to be aimed at striking a balance between supporting genuine hedging needs while curbing arbitrage/speculative activity. While the direction of global geopolitics and energy market dynamics remains uncertain, the risk of further incremental measures will keep aggressive rupee bears at bay." The partial rollback suggests that the RBI is attempting to strike a balance between market stability and operational flexibility, as noted by ABP Live Business, with the move likely to ease trading conditions and improve access to hedging instruments for market participants.