The Indian rupee declined 4 paise to close at 96.57 against the US dollar on Thursday, as heightened hostilities in West Asia kept global crude oil prices elevated. According to The Hindu, the currency opened at 96.53 and traded in a narrow range of 96.45-96.59 during the day before settling at the provisional close. This represents a 28 paise decline from Wednesday's close of 96.53. The rupee's weakness came despite likely central bank intervention, with state-run banks spotted offering dollars most likely on behalf of the Reserve Bank of India. Brent crude oil was trading 2.21% higher at $96.15 per barrel in futures trade, with the global oil benchmark remaining elevated amid concerns over security of oil shipments through the Red Sea and Strait of Hormuz. As per The Hindu, the rupee depreciated by 28 paise to close at 96.53 against the U.S. dollar on Wednesday, with the dollar index trading flat at 101.12.
A likely intervention by the Reserve Bank of India provided crucial support to the rupee, preventing sharper depreciation despite mounting pressure from oil prices. As per The Hindu, forex traders noted that RBI's intervention in the market will prevent sharp depreciation in the rupee. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, said the rupee traded with a negative bias on weak domestic markets and surge in crude oil prices, but diplomatic talks between the two nations may prevent sharp fall in the rupee. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, attributed the negative factors impacting the rupee to the sharp spike in Brent crude following the escalation of conflict in West Asia, particularly the attack on Saudi oil tankers by the Houthis. The USD-INR spot price is expected to trade in a range of ₹96.30 to ₹96.85.
Indian government bonds came under pressure as the benchmark 10-year note yield fleetingly touched a one-month peak, with the yield on the benchmark 10-year note rising as investors braced for a hawkish European Central Bank meeting. According to The Economic Times, the bond market weakness reflected broader concerns about elevated oil prices and their impact on India's economic stability. The rupee's decline coincided with weakness in domestic equity markets, as Sensex extended losses, declining 363.66 points to settle at 76,391.39, while Nifty was down 126.65 points to 23,869.60. Foreign Institutional Investors offloaded equities worth ₹819.20 crore on a net basis on Wednesday, according to exchange data, adding to market pressure.
Brent crude prices surged to over $96 per barrel following recent Houthi attacks and continued US military action in the region. As reported by The Hindu, the renewed surge in oil prices has prompted investors to reload bearish wagers on the rupee after Brent prices had dipped to near $70 per barrel last month. The escalation of conflict in West Asia, particularly the attack on Saudi oil tankers by the Houthis, has kept crude oil prices elevated amid concerns over the security of oil shipments through the Red Sea and Strait of Hormuz. India, the world's third-largest oil importer and consumer, remains highly vulnerable to oil price swings which can upset the economy's growth-inflation balance. The rise in energy prices could have implications for the Federal Reserve's future interest rate strategies.
