The rupee opened at 95.69 per US dollar, compared with Thursday’s (September 10’s) close of 95.44, marking a depreciation of 25 paise, or about 0.26%.
The currency has already lost around 1% over the past three sessions as crude oil prices have surged. Brent crude rose more than 6% on Thursday (September 10) and extended gains in Asian trading, moving close to $110 a barrel amid heightened tensions and disruptions along key shipping routes in the Middle East.
Brent has gained nearly 12% this week, adding to an 8% rise in the previous week. A sustained increase in crude prices could raise India’s import bill and put pressure on the country’s external balances, inflation and growth.
The rupee had recently strengthened from around 95.70 per dollar to a two-month high of 94.30, helped in part by stronger-than-expected overseas Indian deposit inflows and the Reserve Bank of India’s market operations. The recent oil rally, however, has put those gains under pressure.
US yields add to pressure
Higher US Treasury yields have added to the pressure on emerging-market currencies. US yields rose after inflation data strengthened expectations of tighter monetary policy, while higher oil prices also raised concerns about inflation.
The 10-year US Treasury yield moved close to 5%, while Asian equities declined and several Asian currencies weakened.
For India, the combination of higher crude prices, elevated US yields and foreign portfolio outflows could keep the rupee under pressure. On Thursday, the rupee had closed at 95.44 per dollar after declining in the previous sessions.
The key factors to watch now include the trajectory of crude oil prices, foreign fund flows, US yields and the Reserve Bank’s intervention in the currency market.
-With agencies inputs
