Indian Rupee Hits Lowest on Record

The Indian rupee fell to around 95.7 per dollar, extending losses for a fourth consecutive session to two-week lows as surging crude oil prices and higher US Treasury yields weighed on the currency. Brent crude climbed nearly 12% this week, approaching $110 a barrel as intensifying Middle East tensions disrupted shipping through the Strait of Hormuz and Red Sea, raising concerns over India’s external balance, growth and inflation. Meanwhile, US Treasury yields rose after stronger-than-expected producer price data lifted expectations of a Federal Reserve rate hike next week, with markets pricing around a 70% chance of an increase and the 10-year yield nearing 5%. The rupee’s decline comes despite recent RBI support, which had helped it strengthen from around 95.70 to a two-month high of 94.30 last week following stronger-than-expected overseas Indian deposit inflows. However, traders said the RBI appears increasingly reluctant to intervene aggressively as external pressures intensify.

The Indian rupee fell to around 95.3 per dollar, extending losses for a third consecutive session as rising oil prices and higher US Treasury yields intensified pressure on the currency. Brent crude remained above $100 a barrel amid escalating Iran-US tensions, raising concerns over prolonged supply disruptions and higher import costs for India. The rupee has declined about 0.7% over the past two sessions after previously showing resilience to higher crude prices. Meanwhile, the US 10-year Treasury yield climbed to its highest level since 2023, adding to pressure from higher global yields. Although the Reserve Bank of India maintained strong intervention, traders said its support would likely temper rather than reverse the rupee’s decline. The RBI is also using FX swaps to absorb surplus liquidity, with banks raising about $128 billion through non-resident deposits. Core liquidity surplus reached INR 14 trillion–INR 15 trillion, while the RBI aims to drain about INR 7 trillion.

The Indian rupee rose to around 94.4 per dollar, reaching more than two-month highs as persistent Reserve Bank of India intervention and expectations of continued dollar selling supported the currency. The rupee gained 0.9% last week, with the RBI's sustained presence helping insulate it from negative global cues. Traders stated that the central bank's ability to draw on its larger foreign exchange reserves following a surge in foreign-currency inflows has strengthened its capacity to support the currency and contain volatility. Meanwhile, Brent crude surged 7.8% last week to a six-week high of around $97 a barrel after escalating US-Iran tensions raised concerns over prolonged supply disruptions, while stronger-than-expected US jobs data increased the likelihood of a Fed rate hike at its Sept. 15-16 meeting. Attention now turns to US August inflation data due Friday, which could influence expectations for the Fed's policy decision.