Rupee slips on week as Iran tensions curb risk appetite

The rupee ended the week lower, slipping against the dollar as geopolitical tensions around Iran kept traders cautious and prompted a fresh wave of merchant hedging.

The currency closed at 83.12 per dollar, down from last Friday's 82.95, according to Bloomberg data. The move came as oil prices edged higher on concerns that an escalation in the Middle East could disrupt supply through the Strait of Hormuz, a chokepoint for about a fifth of global crude.

Importers, particularly oil refiners, stepped up dollar buying to cover near-term payables, three forex dealers said. That added to pressure from foreign portfolio outflows, with overseas investors pulling roughly $1.2 billion from Indian equities and bonds this week, exchange data show.

The Reserve Bank of India was active in the spot market, selling dollars through state-run banks to prevent a sharper slide, the dealers said. The intervention kept the rupee within a 83.05-83.15 range for most of Thursday and Friday.

Forward premiums edged lower as the RBI's dollar sales drained rupee liquidity. The 1-year implied yield fell 8 basis points to 1.62%, a level not seen since early March.

Traders said the next trigger is Monday's crude oil open. A sustained rally above $90 a barrel would keep hedging demand elevated and test the RBI's willingness to defend 83.20, a level that has held since mid-February.