Rupee strengthens, bond yields fall after US-Iran peace deal eases oil worries

The Indian rupee strengthened to 94.6850 from 95.1175 and the benchmark 10-year government bond yield fell about 4 bps to 6.86% after the US and Iran announced a peace agreement that eased geopolitical tensions and kept the Strait of Hormuz open for commercial shipping. Brent crude prices dropped nearly 8% to around $83/barrel, reducing pressure on India's trade deficit and inflation. Analysts, however, cautioned that rupee gains may be capped near 94 and bond yields unlikely to fall below 6.75% without conviction on an August rate hike, while citing expected $30-50 billion in capital inflows from RBI's FCNR(B) and ECB incentive schemes as additional support.