The rupee is poised to open
weaker on Tuesday, with rising oil prices and US bond yields
adding to pressure on the currency from the central bank
bringing forward the deadline for its swap facility for deposits
raised from non-resident Indians.
The rupee is expected to open in the 95.68 to 95.72
range, traders said, after settling at 95.6025 to the dollar on
Monday. Brent crude climbed past the $91-a-barrel mark, while
the 30-year US Treasury yield rose to its highest in more than
two decades.
A US-Iran truce expired, and Tehran said it would shift to
a “fully offensive” military posture, driving oil prices higher.
The rise in crude, in turn, contributed to the increase in US
Treasury yields. US President Donald Trump told a Fox News
reporter that Iran should surrender.
The pressure from oil and US yields comes after the rupee
weakened following the Reserve Bank of India’s decision to
shorten the foreign-currency deposit swap window by one month to
August 31.
The RBI’s move, which took most bankers by surprise, led the
rupee to weaken past the 95.50 level on Monday despite broad
dollar weakness. Central bank intervention failed to prevent the
rupee from extending its decline.
The rupee was already facing a “challenging” outlook, and
the RBI’s decision has made the picture considerably weaker, a
currency trader at a private sector bank said.
With oil prices now well above $90 per barrel, the currency
faces significantly larger downside risks from here, he said.
Asian cues were largely negative for the rupee, with
oil-sensitive currencies dipping. Risk appetite was dented by
rising US yields, which are moving higher despite markets
increasingly expecting that the Federal Reserve will not hike
interest rates next month.