The Indian rupee weakened against the US dollar in early trade on Tuesday, falling 10 paise to 94.66 as rising crude oil prices and escalating US-Iran tensions weighed on investor sentiment.
At the interbank foreign exchange market, the rupee opened stronger at 94.49 against the US dollar before slipping to 94.66. The domestic currency had closed at 94.56 on Monday after declining 13 paise.
Rising crude oil prices weigh on rupee
The rupee remained under pressure as Brent crude prices climbed amid renewed geopolitical tensions and concerns over possible disruptions to oil supplies through the Strait of Hormuz.
Brent crude rose 0.63 per cent to $97.61 per barrel in futures trade. Higher crude prices are a concern for India as the country relies heavily on imports to meet its oil requirements, potentially increasing demand for dollars and putting pressure on the rupee.
RBI intervention limits losses
Forex traders said continued dollar sales by the Reserve Bank of India (RBI), along with strong foreign-currency inflows under special schemes, helped limit the rupee's decline.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said RBI intervention has played an important role in preventing elevated crude prices from causing a sharper depreciation in the domestic currency.
He expects the USD-INR pair to remain in the 94.00-94.75 range as the RBI continues to intervene in the foreign exchange market.
Investors await inflation data, Fed meeting
Market participants are also awaiting key economic data from India and the US for further direction. Investors will closely track inflation figures as well as the US Federal Reserve's upcoming FOMC meeting on September 16.
The dollar index, which measures the greenback against six major currencies, declined 0.37 per cent to 98.80.
Equity markets also open lower
Domestic equity markets also came under pressure in early trade. The Sensex declined 382.25 points to 75,750.56, while the Nifty fell 97.80 points to 23,681.80.
Foreign institutional investors, however, remained net buyers of Indian equities on Monday, purchasing shares worth Rs 280.13 crore, according to exchange data.
With crude oil prices elevated and geopolitical tensions adding to market uncertainty, the rupee is likely to remain sensitive to global oil prices, dollar movements and foreign fund flows in the near term.
