Rupee Opens 37 Paise Lower Against Dollar After Friday's Strong Rally

The Indian rupee opened weaker on Monday’s trading session, opening 37 paise lower against the US dollar. The domestic currency came under pressure with crude oil prices gaining and Asian stock markets witnessing broad selloff.

The weakness follows a strong performance on Friday when the rupee recorded its biggest single-day gain in nearly two months. It had advanced 0.88% to settle at 94.95 against the dollar after the Reserve Bank of India (RBI) unveiled a series of measures aimed at increasing foreign currency inflows into the country.

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RBI Measures Had Boosted Market Sentiment

Measures announced by the RBI recently to encourage foreign capital inflows could boost foreign exchange inflows into the country, market participants said.

Rupee Weighed Down by Weak Global Markets

But the positive momentum seen on Friday failed to carry into the new week as global market conditions turned less favourable.

Asian equity markets witnessed heavy selling pressure after weakness in US technology stocks spread across global markets. South Korea's benchmark stock index declined nearly 7%, extending the negative sentiment that followed a more than 4% drop in the Nasdaq on Friday.

Rising Crude Oil Prices Add Pressure

The domestic currency also faced headwinds from a sharp increase in international crude oil prices.

Brent crude oil surged 3.5% to $96.36 per barrel after fresh Israeli strikes on Lebanon renewed geopolitical concerns in the Middle East. The developments cast a shadow over hopes for progress in talks about a possible US-Iran deal.

Brent crude rose 3.5% to $96.36 per barrel during the session as India depends heavily on imported crude. Higher crude oil prices also put additional pressure on the local currency by increasing the demand for dollars.

Strong US Economic Data Supports the Dollar

Another factor weighing on the rupee was better-than-expected U.S. employment data.

The strong jobs report pushed U.S. Treasury yields higher and supported market expectations that the U.S. Federal Reserve may keep higher interest rates for a longer period. This was supportive for the dollar and added to pressure on emerging market currencies.

Market Focus Shifts to Global Cues

The rupee’s sharp gain on Friday underscored optimism over the RBI’s efforts to attract foreign capital. Developments in global markets, higher oil prices and a stronger dollar have caused sentiment to shift rapidly. Currency market participants are likely to look for cues from the US Federal Reserve, geopolitical developments and crude oil movements for further direction.