Rupee hovers near 96 as oil stays above $100 per barrel, foreign selling persists
The rupee started off on a weaker note against the US dollar due to soaring crude oil prices and foreign investors selling off. In response, the Reserve Bank of India is stepping in to curb volatile changes, as forex reserves dwindle. Market analysts anticipate a possible interest rate increase following the upcoming monetary policy meeting, while the dollar index remains robust.
The Indian rupee hovered near 96 against the US dollar on Monday, as high oil prices and continued foreign fund selling kept the currency under pressure. Opening at 96.20, the rupee weakened to 96.26, a 1 paisa drop from the previous close. The Reserve Bank of India (RBI) stepped in to curb intraday swings, but higher import bills and a strong greenback continued to weigh on sentiment.
After a sharp decline on Thursday when the rupee closed at 96.25, the currency was trading at its weakest in over two months. Factors like oil prices above $100, high US yields, and heavy foreign portfolio selling contributed to the downward pressure.
The RBI's foreign exchange reserves fell by $18 billion to $748 billion in the week ending September 25, according to official data. This decline was a result of a $18.343 billion drop in the previous reporting week. The RBI's monetary policy committee was set to meet, with economists expecting a 25 basis point rate hike to 5.50%.
Markets were monitoring several developments for their potential impact on the USD/INR pair, including US services data, Federal Reserve minutes, and the RBI's policy decision on Wednesday. Any confirmation of damage to Saudi infrastructure was also awaited. According to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, a Fed decision to maintain rates in October and an RBI rate hike were already priced in.
However, any confirmed damage to Saudi infrastructure could quickly push Brent crude towards its upper range.
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