USD weakens and INR strengthens as markets price in potential end to US-Iran conflict and reopening of Strait of Hormuz.
The Indian Rupee recovered from all-time lows after reports suggested progress in US-Iran negotiations, easing geopolitical tensions. The USD weakened broadly as traders interpreted a pause in US military actions and a potential one-page deal as steps toward ending the conflict.
Earlier, the Rupee had been pressured by elevated oil prices and risk aversion. Consensus had pointed to further INR depreciation amid Fed policy uncertainty and persistent inflation concerns. The Strait of Hormuz reopening could sharply reduce oil prices, boosting risk assets and emerging market currencies.
Markets now await Iran’s expected response within 48 hours. Short-term USD weakness may persist if oil prices decline, but focus will shift back to US economic data and Fed policy, where resilient inflation could delay rate cuts.