Rupee slips to 95.74 against US dollar as crude prices, importer demand weigh
On Tuesday, the Indian Rupee faced a minor decline against the US dollar, influenced by rising crude oil prices and increased demand from importers. The Reserve Bank of India stepped in to stabilize the currency, keeping its fluctuations minimal. Meanwhile, domestic equities opened softly, although foreign institutional investors maintained their purchasing momentum in the stock market.
The Indian rupee slipped to 95.74 against the US dollar on Tuesday, as escalating crude prices and increased demand from importers exerted downward pressure on the currency. The rupee opened at 95.74 in the interbank foreign exchange market, marking a four-paise decline from Monday's close of 95.70. Forex traders attributed the currency's movement to ongoing intervention from the Reserve Bank of India via state-run banks, amid weakness in Asian equities and heightened geopolitical tension surrounding Iran.
The rupee typically remains within a narrow band of ₹95.50–96.00, with oil prices and RBI intervention as primary near-term influences, according to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Bhansali noted that the rupee has been trading within a limited range for the past two weeks. State-owned oil companies and the RBI have been purchasing dollars at the lower end of this range, while the RBI has simultaneously been selling dollars around ₹95.75 to curb further declines. Meanwhile, the dollar index stood at 99.04, a 0.04% increase, bolstered by safe-haven demand following the US ramp-up of sanctions on Iran. However, anticipation of Treasury bond buybacks continued to weigh on the dollar.
Additionally, crude prices played a significant role in the rupee's downward trajectory. Brent crude futures, the global oil benchmark, surged 0.30% to $92.45 a barrel. The weakness in the currency coincided with a sluggish start for domestic equities. The Sensex slipped 30 points to 77,336.32, while the Nifty declined 38.80 points to 24,179.50.
Nonetheless, foreign institutional investors maintained their buying stance in the equity market on Monday, with purchases totaling Rs 1,181.66 crore. The RBI's special USD-INR forex swap facility for FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECB) contributed to foreign exchange inflows of $73 billion as of August 21.
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