The rupee opened at 95.66 per dollar, compared with Monday’s (August 17’s) close of 95.60, marking a decline of 6 paise. The currency later slipped to around 95.68 per dollar, its weakest level in nearly three weeks, according to Reuters.
Why is the rupee under pressure?
A key pressure point is the rise in crude oil prices. Brent crude moved above $90 a barrel after the US-Iran ceasefire expired, raising concerns over the outlook for oil supplies. Higher crude prices are negative for the rupee because India imports most of its crude oil, increasing demand for dollars to pay for those imports.
At the same time, US Treasury yields have risen, weighing on emerging-market currencies. The 30-year US Treasury yield climbed to its highest level in more than two decades, Reuters reported.
The combination of expensive oil and higher US yields has strengthened the pressure on the rupee despite a broadly weaker dollar.
RBI move adds to pressure
The rupee was already under pressure after the Reserve Bank of India brought forward the deadline for its foreign-currency deposit swap facility for non-resident Indians by one month to August 31.
The move surprised several bankers and contributed to the rupee weakening past the 95.50-per-dollar level on Monday (August 17).
The RBI is also believed to have intervened in the foreign exchange market on Tuesday, marking the eighth consecutive session of intervention, according to Reuters. State-run banks were seen offering dollars, which traders said was likely on behalf of the central bank.
With crude now above $90 a barrel, traders expect the rupee to remain vulnerable to further downside pressure, particularly if oil prices stay elevated and US yields continue to rise.
-With Reuters inputs
