• The Indian Rupee declines further against the US Dollar due to surging oil prices.
• A significant fall in the INR has increased the odds of RBI intervention.
• Investors await the US CPI data for fresh cues regarding the interest rate outlook.

The Indian Rupee (INR) extends its decline against the US Dollar (USD) on Wednesday after a sharp correction the previous day. The USD/INR pair jumps marginally above 95.00 as surging energy prices have battered the Indian currency significantly.

As of writing, the MCX Crude Oil contract expiring on September 21 trades higher by over 2.5%, slightly above Rs. 8,950, the highest level seen since May 22.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.

Escalating US-Iran attacks boost oil prices

Rising tit-for-tat attacks between the US and Iran in the past few weeks have prompted fears of prolonged energy supply disruption again.

Earlier in the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) launched ballistic missile strikes targeting the Al Azraq air base in Jordan, which shelters US military personnel and aircraft, in response to US Central Command (CENTCOM) consistently bombing Iranian tankers in the Gulf of Oman, Al Jazeera reported.

Meanwhile, the data from Kpler shows that the number of commodity vessels sailing ​through the Strait of Hormuz ​totalled seven on September 7, compared with eight ⁠on the previous day, Reuters reported. This is a significant decline from an average of 130-140 ships transiting through Hormuz before the Middle East war started.

Falling INR prompts fears of RBI intervention

A significant decline in the Indian currency this week has prompted fears of the Reserve Bank of India’s (RBI) stealth intervention through spot and Non-Deliverable Forward (NDF) markets.