Indian rupee under pressure with Brent near $100 testing RBI defence
MUMBAI: The Indian rupee is likely to extend losses on Wednesday , weighed down by a further rise in oil prices, which would test the central bank’s ability to cushion the currency. The Indian rupee is expected to open in the 94.84 to 94.86 range, per traders, having settled at 94.8175 to the dollar in the previous session. The South Asian currency fell the most in nearly a month on Tuesday with…
Mumbai, India - The Indian rupee is anticipated to continue its decline on Wednesday, exacerbated by surging oil prices which could challenge the Reserve Bank of India's (RBI) efforts to stabilize the currency. The rupee was trading between 94.84 and 94.86 rupees per dollar, following its previous settlement at 94.8175. On Tuesday, the currency witnessed its most significant drop in nearly a month, as rising oil prices counteracted the RBI's containment measures.
The central bank has been actively intervening in the market to bolster the rupee's strength, propelling it to a two-month high earlier in the week. However, traders believe the RBI's intervention was insufficient to prevent the currency's depreciation. This marked a shift from the recent market trends and might indicate a waning commitment from the RBI to forcefully support the rupee amid oil-linked pressures.
A currency trader at a bank suggested that the RBI may be more reluctant to utilize its foreign exchange reserves to lift the rupee higher, given the increasingly unfavorable conditions for the currency. If the rupee were to drop to 95 rupees, this would not be unexpected. The recent rise in oil prices, driven by Iran's recent strikes on US military assets in the Gulf, has pushed Brent crude to $99.66 per barrel, marking its highest level since late July.
This development could bolster the case for a possible Federal Reserve rate hike next week, further strengthening the dollar and intensifying the pressure on the rupee due to increased import costs and rising U.S. Treasury yields.
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