Equities in Mumbai leapt higher while bonds also rose as Brent crude oil futures stayed below $100 per barrel after U.S. President Donald Trump said talks with Iran could resume in Pakistan over the next two days.
Asian stocks rose more than 1% with stocks in Korea, Taiwan and India leading the charge. Ceasefire hopes have helped MSCI’s gauge of Asian stocks wipe out most of its losses since the Iran war started at the end of February.
The Indian rupee rose 0.2% to 93.20 per dollar as of 10:00 a.m. IST. The cost of hedging against rupee weakness declined, with the 1-year implied yield easing to 3.07%, down 12 basis points from the previous session.
The rupee slipped to a record low of 95.21 on March 30 but has since recovered after the central bank tightened forex rules with hopes Middle East hostilities might ebb helping steady the Asian unit.
A sustained recovery in the rupee would depend on whether oil prices fall to pre-war levels and if foreign portfolio outflows ease, an FX salesperson at a private bank said.
Overseas investors have net sold about $20 billion of local stocks over March and April so far. “It’s amazing how much has retracted in terms of the negative hit to risk sentiment post the Iran conflict,” MUFG said in a note.
The firm expects regional currencies like the rupee and Philippine peso to underperform against peers like the Chinese yuan and the Malaysian ringgit.
