Indian Rupee Hits Lowest on Record

The Indian rupee hovered around 95.4 per dollar, remaining under pressure as rising oil prices and weaker Asian currencies weighed on sentiment. The rupee has extended losses for another session since breaking past the 95 per dollar level last Wednesday, as uncertainty over the end of the US-Iran conflict has driven oil prices higher. Brent crude has risen 7% this week and was approaching $90 a barrel, prompting importers to step up hedging and increasing dollar demand, which has offset positive sentiment from RBI interventions. The central bank has been selling dollars through state-run banks in both trading sessions this week, with traders saying the rupee would likely have weakened further without the support. Meanwhile, US inflation data due later Wednesday could provide clues on whether the Federal Reserve will raise interest rates next month, with markets currently split on the prospect of a hike.

The Indian rupee hovered around 95.42 per dollar, edging lower after briefly stabilizing in the previous session as higher oil prices and persistent dollar demand weighed on the currency. Brent crude rose 5% on Monday, moving closer to $88 a barrel, as uncertainty over a US-Iran peace deal reduced hopes of an agreement to reopen the Strait of Hormuz. The latest setback came after US President Donald Trump rejected Iran’s demands for compensation and instead called for Tehran to compensate for deaths linked to past conflicts and attacks. Domestically, strong dollar demand from importers and hedging activity continued to weigh on the currency. The Reserve Bank of India likely continued intervening in the foreign exchange market, with state-run banks seen selling dollars on its behalf, helping absorb some of the demand and limiting the rupee's decline. Meanwhile, the rebound in oil prices pushed the US 10-year Treasury yield to around 4.70%, providing additional support to the dollar.

The Indian rupee fell to around 95.25 per dollar, retreating from four-week highs as a rebound in oil prices revived concerns over India's import bill and inflation outlook. Brent crude rebounded above $83 a barrel, extending gains for a third straight session after rising about 4% on Thursday. The move followed a proposal by Iran and Oman to restrict vessels deemed hostile, stoking fears over supply disruptions. Investors also turned cautious ahead of the US July nonfarm payrolls report, with economists expecting 80,000 jobs to have been added after 57,000 in June and the unemployment rate to remain at 4.2%, as the data could influence expectations for further Federal Reserve rate hikes. Meanwhile, traders monitored the Reserve Bank of India, whose recent dollar sales had helped lift the rupee to a one-month high, though persistent underlying demand for dollars suggested the currency's near-term direction would continue to depend on the extent of RBI support.