Rupee Opens Lower Against U.S. Dollar as Crude Oil Price Rally Weighs on Sentiment

The Indian rupee opened 32 paise lower at 95.94 against the U.S. dollar on July 14, extending its decline for a second consecutive session. The domestic currency came under pressure after renewed military developments involving the U.S. and Iran pushed crude oil price higher, raising concerns over India’s import bill and inflation outlook. The rupee had settled at 95.62 against the U.S. dollar in the previous session.

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Crude Oil Price and Stronger Dollar Pressure Rupee

According to Finrex, the rupee was expected to begin the day on a weaker note, with crude oil price climbing to around $84 per barrel and the dollar index remaining firm ahead of key U.S. inflation data.

The latest weakness follows a third consecutive night of U.S. military strikes on Iran, which has renewed concerns over stability in the Middle East and increased uncertainty around global energy supplies. Higher crude oil price is closely watched in India as the country imports a significant portion of its crude oil requirements.

Market participants are also monitoring whether the Reserve Bank of India steps in to limit excessive volatility if the rupee approaches the 96-per-dollar level.

Asian Currencies Show Mixed Trend

Currency markets across Asia traded mixed during the session. The South Korean won recorded the strongest gain, appreciating 0.295% against the U.S. dollar. The Japanese yen also edged higher by 0.062%, while the Thai baht and Singapore dollar remained broadly unchanged.

Among the weaker currencies, the Indonesian rupiah declined 0.243%, followed by the Malaysian ringgit, which fell 0.208%, and the Philippine peso, down 0.201%. The Chinese renminbi and Taiwan dollar registered only marginal declines.

Investors Monitor Capital Flows

Apart from global developments, domestic market participants are tracking foreign portfolio investment activity and primary market flows. Foreign portfolio investors remained net sellers of Indian equities in the previous trading session, adding pressure on the domestic currency.

According to Finrex, exporters may look to sell U.S. dollars if the exchange rate moves closer to the 96 level, while importers could utilise any pullback in the dollar for their requirements. The opening of the SBI Mutual Fund IPO is also expected to influence liquidity conditions in the market.

Focus Turns to Global Economic Data

Focus now turns to upcoming U.S. inflation data, which could provide further clues for the dollar and global financial markets. Any shift in expectations concerning U.S. interest rates can affect currency movements in emerging markets, India included.

For the domestic market, the rupee’s near-term movement is expected to remain linked to crude oil price trends, foreign investment flows, global risk sentiment and the Reserve Bank of India’s actions to maintain orderly conditions in the foreign exchange market.