The rupee opened at 95.95 per dollar, compared with 95.83/$ at Wednesday’s (September 30’s) close, marking a 12-paise decline.
The currency has pared some of its recent losses after touching around 96.14/$ on Tuesday (September 29), with likely intervention by the Reserve Bank of India (RBI) helping limit the decline. Traders said the central bank appears intent on preventing a sustained break above the 96-per-dollar level.
“Overall, the 96 level remains an important psychological and technical area, with the rupee showing some resilience each time it approaches that level, thanks largely due to the Reserve Bank of India,” Anil Bhansali, head of advisory at Finrex Treasury Advisors, said.
Bhansali said downside pressure on the rupee is likely to persist as oil prices remain elevated and US yields rise, leaving RBI intervention to largely contain the move rather than reverse the broader pressure.
Higher oil prices add to pressure
Brent crude for December delivery rose nearly 2% on Wednesday (September 30) amid stalled US-Iran talks and tighter fuel markets. The rise took Brent’s September gains to around 14%.
Higher crude prices can weigh on the rupee by increasing India’s import bill and demand for dollars from oil importers.
US Treasury yields remain elevated
The 10-year US Treasury yield also rose close to its highest level since 2007 on Wednesday, despite softer-than-expected August inflation data.
Expectations of an October Federal Reserve rate hike have weakened sharply, with the probability falling below 40%, from more than 70% a week earlier.
However, fading rate-hike bets have offered limited relief to the rupee as persistent inflation concerns have kept longer-term US yields elevated. US bond yields recorded their biggest monthly rise in years in September, while the 10-year yield posted its biggest quarterly jump since 2009.
For the rupee, the 96/$ level remains a key psychological and technical level, with crude oil prices, US Treasury yields and RBI intervention likely to remain important factors for the currency.
-With Reuters inputs