Indian Rupee Faces Pressure Near ₹95.80 as Brent Crude Stays Above $107 and US Yields Rise

MUMBAI, September 15: The Indian rupee is facing renewed pressure against the US dollar on Tuesday, with traders watching the ₹95.80-per-dollar level closely as elevated crude oil prices, rising US Treasury yields and a stronger dollar weigh on the currency. The rupee had closed its previous session at around ₹95.55 per dollar.

Market participants are also monitoring possible intervention by the Reserve Bank of India, which has previously stepped in around the ₹95.80 level to prevent excessive volatility.

₹95.80 Emerges as Critical Level

Currency traders view ₹95.80 as an important near-term support level for the rupee.

Reuters reported that the RBI had intervened around this zone on Friday and also during August, with state-run banks selling dollars to limit sharp depreciation in the Indian currency.

A sustained move beyond ₹95.80 could weaken market sentiment and potentially push the rupee towards the psychologically significant ₹96-per-dollar mark, according to traders cited by Reuters.

Brent Crude Around $107 Adds Pressure

High crude oil prices remain one of the biggest challenges for the rupee.

Brent crude was trading around $107 per barrel on Tuesday, supported by fresh attacks on Saudi Arabian infrastructure and continued disruption to important Middle East energy routes.

Saudi Arabia’s strategically important East-West oil pipeline remains disrupted after recent attacks, while uncertainty surrounding the Strait of Hormuz continues to raise concerns about global oil supplies.

Higher crude prices are particularly important for India because the country relies heavily on imported oil. Rising energy costs can increase India’s import bill, boost demand for dollars and put additional pressure on the rupee.

US 10-Year Treasury Yield Crosses 5%

Another major source of pressure is the rise in US government bond yields.

The benchmark 10-year US Treasury yield moved above 5%, reaching its highest level since October 2023 as investors increasingly expect the US Federal Reserve to raise interest rates.

Higher US yields can make dollar-denominated assets more attractive to global investors, strengthening the US currency and creating pressure on emerging-market currencies including the rupee.

Fed Rate Hike Expectations Strengthen Dollar

Markets are closely watching the Federal Reserve’s September 15-16 policy meeting.

A Reuters poll found that 85% of economists expect the Fed to raise rates by 25 basis points, taking its policy range to 3.75%-4.00%. Market pricing has also moved strongly towards a hike following persistent US inflation and higher energy prices.

The dollar index was trading near a two-week high on Tuesday, supported by both rising Treasury yields and expectations of tighter US monetary policy.

India’s Inflation Adds Another Concern

Domestic inflation is also complicating the outlook.

India’s retail inflation increased to 4.82% in August, compared with 4.45% in July, as price pressures spread beyond food and fuel. The reading has strengthened expectations that the RBI may eventually need to consider tighter monetary policy if inflation continues rising.

Elevated crude prices could add further inflationary pressure in coming months by increasing transportation and energy costs.

RBI Intervention Remains in Focus

The RBI has repeatedly acted to reduce sharp fluctuations in the rupee rather than defend a publicly stated exchange-rate target.

On September 11, traders reported dollar sales by state-owned banks that were likely carried out on behalf of the central bank when the rupee weakened to around ₹95.79 per dollar.

With oil prices remaining high and the dollar strengthening, traders will continue watching the central bank’s activity closely if the rupee again approaches or breaches the ₹95.80 level.

For now, the combination of high crude oil prices, elevated US bond yields and Fed rate-hike expectations is likely to keep the Indian currency volatile.

source – Reuters
Supreme News Network