Mumbai, (Economy India): The Indian rupee depreciated for the second consecutive session on Friday, falling 12 paise to close at 94.93 (provisional) against the US dollar, pressured by rising crude oil prices, sluggish domestic equities and renewed geopolitical tensions involving Saudi Arabia and Yemen’s Houthi movement.
Forex market participants said the rupee could continue to face pressure from a stronger US dollar and elevated crude oil prices, with Brent crude hovering near USD 114 per barrel.
Rising Crude Oil Prices Weigh on Rupee
Higher crude oil prices remain a key concern for the Indian currency because India imports a substantial share of its crude oil requirements. A sustained increase in oil prices can raise the country’s import bill and increase demand for dollars in the domestic foreign exchange market.
Forex traders said renewed tensions between Saudi Arabia and Yemen’s Houthi movement could keep oil markets volatile, adding to uncertainty over the rupee’s near-term direction.
The currency’s decline on Friday marked its second consecutive day of depreciation.
Stronger Dollar Adds to Currency Pressure
The US dollar index recovered, adding another source of pressure on the rupee. A stronger dollar can weigh on emerging-market currencies by making dollar-denominated assets more attractive to investors.
Forex traders said the rupee was likely to trade with a slight negative bias amid global dollar strength and elevated crude prices.
Meanwhile, the yield on the benchmark 10-year US Treasury slipped below the 5 per cent level. The combination of movements in the dollar and US bond yields remained an important factor for currency-market sentiment.
Domestic Equity Weakness Adds to Cautious Sentiment
Sluggish domestic equity markets also contributed to pressure on the Indian currency, according to market participants.
Currency movements are influenced by several factors, including foreign investment flows, global risk appetite, oil prices and movements in major currencies. The interaction of these factors will remain important for the rupee’s near-term performance.
Rupee Outlook: Oil Prices and Dollar Movement in Focus
Market participants are expected to monitor crude oil prices, developments in the Middle East and the performance of the US dollar for signals about the rupee’s direction.
For India, persistently high oil prices can increase the cost of energy imports and complicate inflation management. Continued dollar strength may also add pressure to the domestic currency.
Forex traders have indicated a slightly negative near-term bias, although the rupee’s subsequent movement will depend on evolving global and domestic market conditions.
(Economy India)
