The Indian rupee extended its losing streak for a ninth consecutive session on May 21, closing at a fresh record low of 96.83 against the US dollar. According to interbank foreign exchange market data, the domestic currency depreciated 13 paise from the previous session's 96.70, marking a significant decline from the 96.20 level where it had snapped a nine-day losing streak on Thursday. During the trading session, the rupee opened at 96.89 and touched an intraday low of 96.95 before recovering marginally to settle at 96.83. The currency also recorded an intraday high of 96.65 before ending lower for the ninth consecutive trading session.
The rupee's continued decline was driven by elevated crude oil prices due to ongoing tensions in West Asia, increasing concerns around imported inflation and India's trade balance. Brent crude futures traded at $109.95 per barrel, down 2.77% during the session, though prices remained elevated compared to earlier levels this year. India imports nearly 90% of its crude oil requirements, making the domestic economy vulnerable to higher energy prices and supply disruptions. Rising oil prices increase the country's import bill and can widen the current account deficit. The pressure on crude markets intensified after geopolitical developments linked to the Iran conflict and renewed uncertainty around U.S. military intervention in the region.
Market participants tracked a sharp rise in U.S. Treasury yields, which strengthened the dollar globally and reduced expectations of near-term rate cuts by the U.S. Federal Reserve. Based on market data, the U.S. 30-year Treasury yield climbed to a two-decade high, while the 10-year Treasury yield rose to its highest level in nearly 16 months. The dollar index, which measures the U.S. currency against a basket of six major currencies, traded 0.09% higher at 99.42. Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, noted that the rupee weakened due to a stronger dollar, rising Treasury yields and risk aversion in global markets triggered by inflation concerns.
India's forex reserves dropped $8.094 billion to $688.894 billion during the week ended May 15, according to RBI data released on Friday. The overall reserves had jumped by $6.295 billion to $696.988 billion during the week ended May 8, before the latest decline. Foreign currency assets, a major component of the reserves, decreased by $6.483 billion to $545.904 billion for the week ended May 15. Prime Minister Narendra Modi has made multiple public appeals starting May 11 to countrymen to conserve forex by cutting down on foreign travel, limiting fuel use and refraining from gold buys for a year. The value of gold reserves also declined $1.536 billion to $119.317 billion during the reporting week, while special drawing rights (SDRs) were down by $49 million to $18.824 billion.
Despite the record low performance, Anuj Choudhary from Mirae Asset Sharekhan expects the USD/INR spot rate to move within a range of ₹96.50 to ₹97.10 in the near term. The benchmark 10-year government bond yield hardened by 4 basis points to 7.11 per cent as markets expect an interest rate hike in the upcoming June policy due to inflation risks. Economists at Standard Chartered Bank expect 50 bps of rate hikes to 5.75 per cent in FY27, beginning in June, following the sharper-than-expected pace of rupee depreciation. The next Monetary Policy Committee meeting is scheduled for June 3-5, with the central bank maintaining a cautious stance on further rate adjustments amid current economic conditions.
Foreign Institutional Investors (FIIs) turned net sellers after three consecutive sessions of buying and sold equities worth ₹2,457.49 crore on Tuesday, according to exchange data. Despite weakness in the currency market, domestic equities ended higher with the Sensex gaining 117.54 points to close at 75,318.39, while the Nifty advanced 41 points to settle at 23,659. The rupee's continued decline has emerged as a key concern for policymakers and businesses as higher import costs, elevated crude prices and foreign capital outflows continue to weigh on the broader macroeconomic environment.
