Indian rupee endures sharpest fall in over a month as Brent oil barrels towards $100
MUMBAI: The Indian rupee logged its sharpest fall since late-July on Tuesday, pressured by a third straight day of rising oil prices that pushed Brent to near $100 a barrel as the ongoing Iran war deepened worries over sustained energy supply disruptions. On the day, tensions rose following attacks by Yemen’s Houthis on some energy facilities in Saudi Arabia and as Tehran threatened the United…
Mumbai witnessed the Indian rupee's steepest drop in over a month on Tuesday, as oil prices continued their upward trajectory, reaching a near $100 a barrel level due to the escalating Iran war and heightened fears of ongoing energy supply disruptions. The rupee plummeted to 94.8175 per dollar by the session's end, marking a 0.35% decline from its previous close.
Traders noted that dollar sales from state-run banks, likely on behalf of the Reserve Bank of India, helped absorb some of the currency's loss, but did not appear aimed at stabilizing it at a specific level. The central bank's persistent interventions had previously propelled the rupee to a two-month high last week, but this rally has now encountered resistance due to the renewed surge in oil prices and ongoing hedging demands from local importers.
Similarly, other emerging market currencies faced pressure on Tuesday, with the Thai baht and South African Rand each slipping by around 0.4%. Similar to the Indian rupee, Asian stocks experienced a decline, with the MSCI gauge of regional stocks falling by approximately 1%. Similarly, Mumbai's equities saw a decline of 0.6%. Analysts anticipate that oil prices will continue to be a significant factor influencing foreign exchange markets in the near term, along with evolving expectations for a potential U.S. rate hike in the following days.
A crucial U.S. consumer inflation reading is scheduled for Friday. ING analysts opined that while the bullish case for the dollar appears stronger in the near term, the Friday's U.S. CPI release remains a critical risk event. Currently, markets price in a 60% chance of a rate hike by the Federal Reserve next week.
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