The rupee opened at 96.41 per US dollar, compared with Monday’s (July 20’s) close of 96.45/$, marking a marginal gain of 4 paise.
The currency had weakened beyond the 96.50/$ mark in the previous session, its lowest level in nearly two months, before recovering slightly after suspected intervention by the Reserve Bank of India (RBI), according to traders.
Oil prices, geopolitical risks keep pressure on rupee
The recent weakness in the rupee has coincided with a rise in crude oil prices amid renewed tensions between the US and Iran. Brent crude had crossed $91 a barrel on Monday (July 20) before easing to around $88.50 a barrel.
For India, higher crude prices remain a key concern as the country imports a large share of its crude oil requirement. A sustained rise in oil prices can widen the trade deficit and increase demand for dollars, putting pressure on the rupee.
Market concerns also increased after Iran-aligned Houthi forces in Yemen indicated plans to impose a naval blockade on Saudi Arabia, raising fears of further disruption to energy supplies.
Derivative market signals cautious outlook
Currency market indicators suggest investors have turned more cautious on the rupee. Traders said the gap between onshore and offshore forward markets has widened, while demand for options that protect against further rupee depreciation has increased.
This indicates that market participants are preparing for continued volatility rather than expecting an immediate recovery in the currency.
RBI measures bring inflows, but near-term pressure remains
The RBI on Monday (July 20) said measures announced last month to strengthen the balance of payments and attract foreign capital have drawn more than $20 billion in inflows.
While the inflows have exceeded market expectations, traders believe they may not provide immediate relief to the rupee as global factors, particularly crude prices and geopolitical developments, continue to dominate currency movements.
The rupee’s near-term direction will likely depend on the movement in crude oil prices, dollar strength and developments around geopolitical tensions.
-With Reuters inputs
