MUMBAI, September 29: The Indian rupee weakened beyond the ₹96-per-dollar mark on Tuesday, falling to its lowest level in around two months as rising global crude oil prices, foreign investor outflows and elevated US bond yields increased pressure on the domestic currency.
The rupee traded around ₹96.1450 against the US dollar, down approximately 0.2% during the session, after closing at ₹95.9825 on Monday.
Rupee Falls Below ₹96 Mark
The Indian currency crossed the psychologically important ₹96 per US dollar level during Tuesday’s trading session.
The decline came after several sessions in which the rupee had remained close to the ₹96 mark amid volatility in global financial markets.
Currency traders are closely watching whether the rupee stabilises around current levels or faces additional pressure from global economic developments.
Rising Oil Prices Put Pressure on Rupee
The sharp increase in international crude oil prices has emerged as one of the main factors weighing on the rupee.
Brent crude climbed above $106 per barrel, with prices rising amid continued concerns over oil supplies from the Middle East.
Higher crude prices are particularly important for India because the country relies heavily on imported energy.
When international oil becomes more expensive, Indian importers require more US dollars to pay for crude purchases, increasing demand for the American currency.
Middle East Tensions Keep Crude Prices Elevated
Global oil markets remain volatile amid continuing geopolitical tensions in the Middle East.
Concerns over disruptions to energy supplies and shipping routes have kept crude prices at elevated levels.
Brent crude was trading close to $107 per barrel, while US West Texas Intermediate crude also recorded gains.
Any prolonged increase in energy prices could increase India’s import bill and put further pressure on the rupee.
Foreign Investors Pull Money From Indian Markets
Foreign portfolio investor activity has also weighed on the domestic currency.
Foreign investors have withdrawn approximately $3.7 billion from Indian markets during September, contributing to increased demand for dollars.
When overseas investors sell Indian stocks or bonds and convert their proceeds into foreign currencies, it can add downward pressure on the rupee.
Indian Stocks and Bonds Face Pressure
Rising crude oil prices and global bond yields have also affected sentiment across Indian financial markets.
Investors are assessing the potential impact of higher energy costs on inflation, corporate earnings and economic growth.
Bond markets have also faced pressure as yields rise globally, increasing concerns about borrowing costs.
US Treasury Yields Remain Elevated
Another factor affecting emerging-market currencies is the sharp rise in US Treasury yields.
The benchmark 10-year US Treasury yield has moved above 5%, reaching levels not seen for many years.
Higher US yields can make dollar-denominated assets more attractive to global investors, potentially encouraging capital to move away from emerging markets such as India.
Strong Dollar Adds to Currency Pressure
The US dollar has remained relatively strong against several major global currencies.
Expectations that the US Federal Reserve may maintain higher interest rates or raise rates further have supported the dollar.
A stronger dollar typically puts pressure on emerging-market currencies, including the Indian rupee.
RBI Intervention Closely Watched
Market participants are closely monitoring possible intervention by the Reserve Bank of India (RBI) to reduce excessive volatility in the currency market.
The central bank has previously used its foreign exchange reserves and transactions through state-run banks to moderate sharp movements in the rupee.
The RBI generally does not target a fixed exchange rate but can intervene when currency movements become unusually volatile.
₹96 Level Seen as Important Market Zone
The ₹96-per-dollar level has become an important reference point for currency traders.
The rupee had remained close to this level in recent sessions, with traders watching for signs of central-bank intervention.
Tuesday’s movement beyond ₹96 indicates that pressure from oil prices, foreign flows and global interest rates remains significant.
Higher Rupee Weakness Can Increase Import Costs
A weaker rupee makes imported products more expensive in local currency terms.
The impact can be particularly significant for crude oil, natural gas, electronics, machinery and other imported goods.
Higher import costs can eventually affect businesses and consumers if companies pass increased expenses on through higher prices.
Exporters Could See Some Benefit
While a weaker rupee increases import costs, some Indian exporters may benefit because their foreign-currency earnings translate into more rupees.
Industries such as information technology, pharmaceuticals and export-oriented manufacturing can sometimes benefit from currency depreciation.
However, the overall impact varies depending on input costs, hedging arrangements and global demand.
Inflation Concerns Could Increase
Persistently high crude prices could create additional inflationary pressure in India.
Energy costs influence transportation, manufacturing, logistics and several other parts of the economy.
If oil remains elevated for an extended period, policymakers may face the challenge of balancing inflation risks with economic growth.
RBI Policy Meeting Gains Importance
The rupee’s weakness comes ahead of the Reserve Bank of India’s upcoming monetary policy meeting in October.
Markets are increasingly watching whether inflationary pressures, strong domestic growth and global interest-rate increases could influence the central bank’s next decision.
Currency stability and global financial conditions are likely to remain important considerations for policymakers.
Global Developments to Determine Rupee Direction
The rupee’s near-term movement is expected to depend heavily on international crude prices, foreign investor flows, US interest rates and developments in the Middle East.
A decline in oil prices or improvement in global risk sentiment could provide support to the currency.
However, continued strength in crude oil and the US dollar could keep the rupee under pressure.
For now, traders are closely watching the ₹96-per-dollar level as global economic and geopolitical uncertainty continues to influence Indian financial markets.
Source – Reuters / Reserve Bank of India / Economic Times
Supreme News Network
