FX.co ★ Rupee Falls to 2-Month Low on Oil Surge

The Indian rupee weakened to about 96.4 per dollar, its lowest level since May, as sentiment soured following a sharp escalation of tensions in the Middle East that pushed oil prices higher. Investor worries over India’s import bill and inflation outlook deepened after Brent crude rose above $90 per barrel, extending its July rally amid a ninth consecutive night of US strikes on Iran after the breakdown of an interim ceasefire. The rupee has depreciated roughly 1.7% so far this month, and traders cautioned that a move in Brent crude above $95 per barrel could drive the currency to new record lows unless the Reserve Bank of India steps up its intervention. At the same time, investors tracked foreign portfolio flows in the wake of recent policy measures designed to attract dollar inflows. Overseas investors have been net buyers of $2.3 billion in Indian equities and bonds so far in July, while markets awaited a decision on whether Indian government bonds would be added to a major global debt index.