Rupee to rise on oil pullback after Trump signals talks; Iran denial clouds outlook

The Indian rupee is poised to rise at the open on Tuesday, boosted by the dip in oil prices after US President Donald Trump hinted at talks about a resolution with Iran, although Tehran's denial of any talks kept uncertainty high.

The 1-month non-deliverable forward indicated the rupee will open in the 93.50 to 93.60 range versus the US dollar, after settling at 93.9750 in the previous session, when it hit an all-time low of 93.98.

Brent crude dropped 11% on Monday after Trump said he had ordered a delay to attacks on Iran's power plants, adding the US had held productive talks with unnamed Iranian officials. US equities advanced, the dollar dropped and US Treasury yields declined.

Part of these moves reversed in Asian trading, with Brent recovering nearly 4%. Asian equities rose, though they were well off their highs.

Iran's denial of talks with the US, coupled with a Wall Street Journal report that Saudi Arabia and the UAE are inching towards joining the fight against Tehran dented the positive sentiment triggered by Trump's remarks.

"From Asia's perspective, what matters is the physical flow of barrels (via the Strait of Hormuz), and over here time is of essence," MUFG Bank said in a note.

The 1-month USD/INR had dropped to a low of 93.35 immediately after Trump's remarks, which would have meant that the rupee would have risen past the 93 handle. However, with oil prices marching higher, the 93 level looks "out of the question", a currency trader at a Mumbai-based bank said.

"Basically all markets are chasing headlines and looking at oil," he said. The rupee is at levels "which look really attractive, however you just do not know how Iran situation will play out and that keeps conviction low".

Indian equities were poised to open higher, according to futures, though they too were well off the highs seen after Trump's remarks.