The rupee suffered its biggest single-day decline in nearly two months on Tuesday, falling 33 paise to close at ₹94.82 (provisional) against the US dollar as Brent crude moved closer to the $100-a-barrel mark amid escalating tensions in West Asia.
The domestic currency, which had closed at ₹94.49 on Monday, declined 0.35% during the session. Brent crude futures ended at $98.18 a barrel, up 1.22%, after touching $99.45 during the day.
The fall reversed part of the rupee’s recent gains. The currency had strengthened nearly 1% over the previous week, helped by robust FCNR(B) inflows and RBI intervention.
“After remaining unchanged for two consecutive sessions, the Indian rupee fell sharply amid persistent risk-off sentiment and higher oil prices, as aggressive dollar buying outstripped liquidity,” said Dilip Parmar, senior research analyst at HDFC Securities.
He added that ongoing geopolitical worries and a lack of supportive FII inflows had amplified the decline, while markets remained cautious ahead of domestic inflation data and major central bank policy decisions.
Brent crude has risen for three consecutive sessions as the conflict in West Asia has raised concerns over prolonged disruptions to global energy supplies. Fresh attacks on Saudi energy facilities by Yemen’s Houthi forces have added to an already tense backdrop in the region.
For India, higher crude prices translate into a larger import bill and greater dollar demand from oil companies and other importers, putting pressure on the domestic currency.
“Rupee traded weak at 94.81, down 0.29%, as the dollar hovered near 98.95 and Brent crude remained elevated around $97,” said Jateen Trivedi, VP research analyst – commodity and currency at LKP Securities.
“Persistent FII selling over the past few sessions has added further pressure on the currency,” he added.
Importer hedging also added to dollar demand as oil prices rose and geopolitical uncertainty persisted. Broader dollar strength against emerging-market currencies further compounded the pressure, while Indian equities also ended lower on Tuesday.
Traders told Reuters that state-run banks were seen selling dollars during the session, most likely on behalf of the RBI, helping limit the rupee’s decline.
The central bank has been intervening in the foreign exchange market as higher oil prices and geopolitical risks have weighed on the currency.
Despite Tuesday’s decline, the rupee remains stronger than its end-August level.
The rupee’s near-term trajectory is likely to depend on crude prices, developments in West Asia and foreign fund flows. Markets will also track the US PCE price index due this week and the Federal Reserve’s policy decision next week.
Trivedi said the market was increasingly pricing in the possibility of a rate hike by the Fed, which could support the dollar and put further pressure on emerging-market currencies.
Parmar said the rupee is expected to trade within a range in the near term, with ₹95.10 acting as resistance and ₹94.45 as support.
