Rupee falls 16 paise to 96.13 against US dollar in early trade

Mumbai: On Tuesday, the Indian rupee slipped below the 96-per-dollar threshold in early trading, as elevated crude oil prices and ongoing foreign investor selling put downward pressure on the currency. At the interbank foreign exchange market, the rupee debuted at 96.03 against the US dollar before declining to 96.13, marking a 16 paise drop from Monday's close of 95.97.

Forex analysts cited the rupee's early weakness to the US dollar to surging oil prices and climbing US bond yields. An increase in nominal and inflation-adjusted yields in the United States can divert investment away from emerging markets like India. Brent crude futures climbed 1.51 percent to $106.87 a barrel, driven by worries about potential supply disruptions in the Strait of Hormuz.

The Indian economy's vulnerability to oil price fluctuations is evident, given its heavy dependence on imported crude. The dollar index, which gauges the US currency's performance against six major counterparts, rose slightly by 0.04 percent to 101.23. Looking ahead, Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, expects the rupee to potentially trade around 96.50 within the next few days.

A sustained breach of this mark could push the currency towards 98, while 95.50 serves as a crucial support level. Banerjee also highlighted robust domestic data, with industrial output surging 8 percent in August and ongoing strong demand for bonds during the Reserve Bank of India's substantial bond sales this month. These positive indicators may assist in maintaining a controlled adjustment of the currency value.

The Indian equities market also contributed to the overall cautious sentiment. Early trade saw the Sensex tumble 503 points to 72,260.09, while the Nifty fell 151 points to 22,626.50. Foreign institutional investors sold shares worth a net ₹5,353.22 crore on Monday, as reported by exchange data. Market participants will keep a close watch on oil prices, US yields, and foreign fund flows to gauge the rupee's next move.