The Indian rupee weakened past the 96-mark against the US dollar once again on Monday, its weakest level since May, as a sharp rally in global crude oil prices and rising US bond yields reignited pressure on the domestic currency. The latest decline comes after the rupee had briefly recovered in recent weeks, supported by Reserve Bank of India (RBI) measures aimed at attracting dollar inflows.
The renewed weakness follows escalating geopolitical tensions in the Middle East, which have pushed Brent crude prices to their highest level in over a month. As India imports nearly 85% of its crude oil requirements, higher energy prices typically widen the country’s import bill, increase demand for dollars, and weigh on the rupee.
Currency dealers mentioned that the rupee came under pressure from a mix of rising oil prices and a firmer US dollar. Brent crude has climbed, well, by more than 20% compared with its recent lows. At the same time, US Treasury yields have moved higher after hawkish signals from Federal Reserve officials. This, in turn, is making dollar-denominated assets more attractive to investors.
And the stronger greenback has also helped push down several currencies across Asia, including the rupee, as India is heavily reliant on crude oil imports, so the whole thing tends to ripple through the exchange market.
It is expected that the RBI will monitor rupee movements and, if it sees the situation becoming volatile, intervene to stabilize the currency. Earlier, it had sold dollars in the forex market to avoid the currency’s sharp devaluation. Analysts feel that intervention might curtail losses, but it will not change the trend if oil prices remain high.
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As the rupee falls, its impact will be felt in the prices of imports such as crude oil and electronics. Over time, it will result in higher fuel prices and transport expenses.
For now, traders will closely watch developments in the Middle East, movements in global crude prices, and the Federal Reserve’s policy outlook, all of which are expected to determine the rupee’s near-term direction. Unless oil prices ease or foreign capital inflows improve, the Indian currency is likely to remain under pressure in the coming sessions.