Indian Rupee Drops 13 Paise Amidst Oil Price Surge & Fed Hike Fears
By Market Desk
The Indian Rupee depreciated by 13 paise to 95.56 against the USD, driven by rising crude oil prices and anticipation of a US Federal Reserve rate hike.
The Indian rupee declined by 13 paise to trade at 95.56 per US dollar on Monday morning. This depreciation was driven by a combination of rising crude oil prices, escalating geopolitical tensions, and increased market expectations for a September interest rate hike by the US Federal Reserve.
The rupee commenced trading at 95.56 in the interbank foreign exchange market, reflecting a 13-paise drop from its previous closing value. On the preceding Friday, the rupee had settled at 95.43 against the US dollar. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, attributed the lower opening to the dollar index trading at 99.62.
Global Market Headwinds
Globally, the dollar index, which measures the dollar’s strength against six major currencies, was marginally lower by 0.07 percent at 99.62. Conversely, Brent crude, the international oil benchmark, saw a significant 1.34 percent increase, trading at $89.28 per barrel in futures.
This surge in oil prices stemmed from renewed Middle East supply-risk premiums. Concerns about oil flows through the Strait of Hormuz heightened following a US strike on Iran’s Larak Island and subsequent Iranian retaliation.
Domestic Market Overview
Forex traders indicated the Reserve Bank of India (RBI) is actively intervening in the market to prevent any significant rupee depreciation. Investor sentiment also received a positive boost from better-than-expected inflows under the Foreign Currency Non-Resident (Bank) [FCNR(B)] scheme.
On the domestic equities front, both major indices recorded declines. The Sensex fell 226.60 points to 77,028.56, while the Nifty dropped 120.40 points to 24,053.55. Foreign institutional investors were net sellers on Friday, offloading equities worth Rs 5,039.80 crore.
India’s forex reserves reached a new all-time high of $729.328 billion, increasing by $12.422 billion during the week ending August 21, as reported by the RBI. Looking ahead, Bhansali anticipates the rupee will trade within the range of 95.25 to 95.75.
He further suggested that exporters might sell near 95.60, with importers buying on dips, indicating a lack of clear directional movement for the currency. Additionally, the Commerce Ministry is scheduled to meet with industry associations and export promotion councils on September 1 to discuss India-US trade performance.