The Indian rupee weakened by 33 paise to open at 95.95 against the US dollar on Tuesday, 14 July, as renewed geopolitical tensions in the Middle East lifted crude oil prices and dented investor sentiment.
The currency came under pressure after a third consecutive night of US strikes on Iran heightened concerns that the fragile ceasefire could unravel, triggering a fresh rally in global oil prices.
Adding to the pressure, hawkish comments from a US Federal Reserve official pushed Treasury yields higher, a move traders said could further weigh on the rupee.
Brent crude rose to $85.64 a barrel in Asian trade, its highest level in more than a month, following the latest US military strikes on Iran and reports of attacks on tankers in the Strait of Hormuz.
After surging nearly 10% on Monday, Brent is now up more than 20% from its recent lows, reversing much of the relief the rupee had enjoyed from softer crude prices in recent weeks.
The rupee had earlier recovered to around the 94-per-dollar mark after the Reserve Bank of India (RBI) announced measures to attract dollar inflows, improving the currency’s near-term outlook. However, although a significant portion of those inflows is still expected, the resurgence in crude oil prices has once again emerged as the primary source of pressure on the domestic currency, according to a Reuters report citing a currency trader at a bank.
(more to come)