Indian Rupee Declines to 96.13 Against US Dollar Amid Economic Pressures

The Indian rupee decreased by 16 paise in early trading on Tuesday, falling to 96.13 against the US dollar, compared to a closing rate of 95.97 the previous day. The decline has been attributed to escalating crude oil prices and ongoing foreign fund outflows.

In the interbank foreign exchange market, the rupee opened at 96.03 before declining further. The rise in Brent crude oil prices, now at $106.87 per barrel, combined with increasing US bond yields, has intensified pressure on emerging market currencies, including the rupee.

Forex traders emphasised that high oil prices significantly impact India's import costs, making the currency vulnerable. Brent crude noted a rise of 1.51 per cent following concerns regarding supply disruptions, particularly through the strategic Strait of Hormuz.

In addition to crude price fluctuations, traders pointed to US bond yields that have made dollar-denominated assets more appealing, contributing further to the rupee's depreciation. The dollar index, which gauges the strength of the US dollar against a basket of six currencies, edged up by 0.04 per cent, registering at 101.23.

Anindya Banerjee, the Head of Commodity and Currency Research at Kotak Securities, indicated potential further weakness for the rupee, predicting it could approach 96.50 in the coming days. Additionally, he noted that should the currency surpass the 96.50 mark, the threshold of 98 could come into play, although there exists some support at 95.50.

Despite the rupee's struggle, the Reserve Bank of India's bond sales and an industrial output growth of 8 per cent in August are seen as factors that may provide some domestic support to the economy.

On the stock market front, Indian equities faced declines in early trade, with the Bombay Stock Exchange's Sensex slipping by 503 points to 72,260.09, while the National Stock Exchange's Nifty dropped by 151 points to 22,626.50. Data indicate that foreign institutional investors sold shares worth Rs 5,353.22 crore on a net basis on Monday.