Rupee Opens 20 Paise Lower Against U.S. Dollar As Crude Price Climbs

The Indian rupee depreciated by 20 paise to open at 95.17 against the U.S. dollar on Wednesday, July 8, pressured by a sharp rise in the crude price and stronger U.S. Treasury yields following renewed geopolitical tensions in West Asia.

The domestic currency had settled at 94.97 in early trade on Tuesday after recording its strongest single-day gain in more than three weeks. However, the latest surge in the crude price and a firmer U.S. dollar shifted sentiment, leading to a weaker opening for the rupee.

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Crude Price And Bond Yields Weigh On Rupee

The rebound in the crude price has renewed concerns over inflation globally, prompting selling in the U.S. Treasury market. The yield on the benchmark 10-year U.S. Treasury note climbed to 4.5650%, its highest level in nearly a month.

A higher crude import bill typically puts pressure on the Indian currency, as India depends heavily on imported oil. Higher yields on Treasuries tend to support the U.S. dollar as they make dollar-denominated assets more attractive to investors.

Dollar Index Strengthens

The U.S. Dollar Index, which measures the greenback against a basket of six major currencies, moved above the 101 mark during early trade.

At the same time, most Asian currencies traded lower against the U.S. dollar, reflecting cautious investor sentiment amid escalating geopolitical developments. Regional equity markets also opened in negative territory as investors assessed the impact of higher energy prices and global risk aversion.

Rupee Had Rebounded In Previous Session

The rupee had recovered sharply on Tuesday after sustained dollar selling in the non-deliverable forwards (NDF) market supported the domestic currency. That recovery followed a difficult week in which the rupee had weakened by nearly 1% against the U.S. dollar.

Wednesday’s opening indicates that the previous session’s gains were short-lived as global developments once again influenced currency markets.

Markets Watch Global Developments

Currency markets are expected to remain sensitive to movements in the crude price, the direction of the U.S. dollar and developments in the Middle East. Investors will also monitor U.S. bond yields and global risk sentiment, as these factors continue to influence capital flows into emerging markets.

For India, fluctuations in the crude price remain a key variable because they affect inflation expectations, the country’s import bill and demand for the U.S. dollar. Geopolitical uncertainty remains high and market participants are therefore likely to keep a close watch on international developments for further cues on the rupee’s path, they said.