The Indian rupee opened 11 paise weaker at 95.87 against the US dollar on Friday, 15 May, as rising US Treasury yields strengthened the dollar and added to pressure from elevated crude oil prices.
The currency has now fallen to fresh record lows for three consecutive sessions, declining around 1.36% this week. Bankers said the pace of depreciation has likely been moderated by the Reserve Bank of India’s intervention.
The rupee hit an unprecedented intraday low of 95.9575 per dollar on Thursday before recovering slightly. Recent indications of potential measures to draw in dollar inflows and alleviate pressure on the currency provided only temporary support, as the rupee quickly resumed its downward trend thereafter.
Ongoing foreign equity withdrawals, high dollar demand from oil marketing firms and importers, and limited dollar sales from exporters continue to negatively impact the domestic currency.
Brent crude prices remained high at around $107 per barrel, indicating ongoing pressure from energy costs. With India importing nearly 90% of its crude oil needs, the rupee is particularly susceptible to fluctuations in oil prices.
Investors are paying close attention to the outcomes of the discussions between Donald Trump and Xi Jinping.
At the same time, the yield on the US 10-year Treasury surpassed 4.50%, its highest level in a year, strengthening the dollar and putting further strain on emerging-market currencies, such as the rupee.
(more to come)