MUMBAI: The Indian rupee fell on Monday on worries over a broader conflict in the Middle East but avoided slipping to a record low as the central bank possibly curbed losses, traders said.
The rupee was at 83.4350 to the U.S. dollar at 10:46 a.m. IST compared with 83.4125 in the previous session.
The domestic currency has traded in a 2 paisa range so far, managing to hold above the 83.4550 record low, which was hit earlier this month.
The Reserve Bank of India (RBI) likely sold dollars at open to limit the fallout of the developments in the Middle East, traders said.
While the rupee does appear vulnerable, the "anticipation of RBI" is keeping the losses on the it limited, Amit Pabari, managing director at forex advisory firm CR Forex said.
"The downside risk for the rupee is capped to approximately 83.50."
Asian currencies struggled, risk appetite soured and the dollar index was near its best level in six months in the wake of Iran's attack on Israel. Brent crude was down 0.4 per cent at US$91.10 per barrel.
From the rupee's perspective, oil prices are "quite alright" following the attack and "that is good", a fx trader at a bank said.
"This will obviously change if Israel retaliates and you have the conflict widen out."
Apart from the Middle East, Asian currencies will be eyeing U.S. Treasury yields which have been moving up amid changing Federal Reserve policy expectations. Following the third higher-than-expected U.S. inflation, investors now see only about two rate cuts this year.
That is less than the three Fed policymakers projected at the last meeting and well shy of the 6-7 expected at the beginning of the year. - Reuters