The rupee has weakened for seven consecutive sessions, losing around 1.5% during the period, according to the data provided. The currency has come under pressure from elevated crude oil prices, a stronger US dollar and rising global bond yields.
Why the rupee is under pressure
A key pressure point for the rupee has been the sharp rise in crude oil prices. Brent crude was trading around $107.71 a barrel, after touching $108 earlier, amid concerns over supply disruptions linked to escalating tensions in the West Asia.
Higher crude prices can increase India’s import bill and raise demand for dollars from oil importers, putting pressure on the rupee.
The dollar index was also trading higher at 99.61, adding to pressure on emerging-market currencies.
What is the market watching now?
The focus has shifted to the US Federal Reserve’s policy decision later on Wednesday (September 16). Interest-rate futures were pricing in more than a 90% probability of a Fed rate hike, compared with around 60% a week earlier, according to the CME FedWatch Tool.
With a rate hike largely reflected in market pricing, investors are expected to focus on the Fed’s guidance on the future path of interest rates, along with its updated economic projections and dot plot.
Higher US interest rates and yields can support the dollar and put pressure on currencies such as the rupee by influencing global capital flows.Key levels for the rupee
The rupee breached the 95.80 level on Tuesday (September 15), which traders had viewed as a key level of support. A sustained move beyond the 96-per-dollar mark could remain important for the currency’s near-term direction.
Mirae Asset Sharekhan’s Anuj Choudhary had earlier estimated the dollar/rupee spot range at 95.75-96.15, while HDFC Securities’ Dilip Parmar placed resistance at 96.30 and support at 95.45.
The Reserve Bank of India has also been intervening in the currency market to manage volatility, according to market participants.
Meanwhile, India’s foreign exchange reserves rose by a record $44.903 billion to $785.706 billion in the week ended September 4, according to the RBI.
