The rupee falls to 94.98 against the US dollar as rising crude oil prices and Middle East tensions weigh on the currency. The Indian currency opened lower on Monday amid risk aversion in global markets. However, weakness in the US dollar and US Treasury yields limited its losses.
At the interbank foreign exchange market, the rupee opened at 94.92 before slipping to 94.98. It declined 5 paise from its previous close of 94.93. On Friday, the currency had fallen 12 paise, marking its second consecutive session of losses.
The latest decline comes as elevated oil prices and geopolitical uncertainty increase pressure on India's currency. Forex market participants are also monitoring foreign investment flows and potential intervention by the Reserve Bank of India (RBI).
Key Highlights
- The rupee fell 5 paise to 94.98 against the US dollar on Monday.
- Brent crude rose 1.92% to $114.48 per barrel amid geopolitical tensions.
- India's forex reserves declined by $5.011 billion to $721.016 billion in the week ended October 16.
Rupee Falls as Crude Oil Prices and Geopolitical Risks Rise
The rupee falls amid concerns over escalating tensions in West Asia and their potential impact on global energy markets. Higher crude oil prices can put additional pressure on India's currency because the country relies heavily on imported oil.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the rupee opened slightly lower due to elevated crude oil prices and geopolitical tensions. He expects the currency to maintain a slightly negative bias as investors remain cautious about global developments.
Choudhary noted that elevated oil prices and selling pressure from foreign institutional investors (FIIs) could weigh on the rupee. However, a weaker US dollar and fresh intervention by the RBI could provide support at lower levels.
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Meanwhile, the dollar index, which measures the US dollar against a basket of six major currencies, was trading at 101.49, down 0.15%.
Brent crude, the global oil benchmark, gained 1.92% to trade at $114.48 per barrel in futures trading. The rise in oil prices remains a concern for India, as higher import costs can affect the country's trade balance and currency demand.
Sensex and Nifty Decline as Forex Reserves Fall
Domestic equity markets also opened lower on Monday. The BSE Sensex dropped 536.30 points to 72,583.86, while the Nifty 50 declined 200.10 points to 22,402.80 in early trade. Despite the currency's recent weakness, foreign institutional investors purchased Indian equities worth Rs 887.65 crore on a net basis on Friday, according to exchange data.
Separately, Reserve Bank of India data released on Friday showed that India's foreign exchange reserves declined by $5.011 billion to $721.016 billion in the week ended October 16. The reserves had already fallen by $8.578 billion to $726.027 billion in the previous reporting week. The latest decline marks another reduction in the country's foreign exchange holdings.
Going forward, crude oil prices, developments in West Asia, movements in the US dollar, and RBI actions will remain key factors for the rupee. While a softer dollar may offer some relief, sustained pressure from expensive oil could continue to challenge the Indian currency.
