Rupee Depreciates 38 Paise to 95.92 Amid Rising Oil Prices, Strong Dollar

The rupee declined 38 paise to close at 95.92 (provisional) against the US dollar on Tuesday, pressured by escalating tensions in the Middle East, a surge in global crude oil prices and a stronger American currency.

At the interbank foreign exchange market, the rupee opened at 95.84 against the US dollar but weakened during the session to settle at 95.92. On Friday, the domestic currency had closed at 95.54. Forex and equity markets were shut on Monday on account of Ganesh Chaturthi.

Brent crude, the global oil benchmark, rose 1.92 per cent to USD 107.71 per barrel in futures trade, after touching the USD 108 level, amid concerns over supply disruptions due to escalating US-Iran tensions and possible disruption to oil flows through the Strait of Hormuz.

Forex traders said elevated crude prices have increased dollar demand from oil importers, raising concerns over India's inflation outlook and external trade balance. Weak domestic equities, a firm US dollar and worries over rising global Treasury yields further weighed on investor sentiment.

"We expect the rupee to trade with a negative bias on risk-off sentiments in global markets and worries over rising global treasury yields," said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.

He said rising crude prices and a strong dollar could further pressure the rupee, although RBI intervention may support the currency at lower levels. Traders are also expected to track US employment and manufacturing data ahead of the Federal Open Market Committee's decision on Wednesday.

Choudhary expects the USD-INR spot rate to trade between 95.75 and 96.15.

Meanwhile, the dollar index rose 0.22 per cent to 99.61. Domestic equities also witnessed heavy selling, with the Sensex falling 777.94 points to 74,003.82, while the Nifty declined 279.50 points to 23,118.60.

India's forex reserves, however, rose by a record USD 44.903 billion to USD 785.706 billion in the week ended September 4, according to the RBI.