Rupee slips to 95.96 amid crude oil spike and market sell-off

The rupee fell 23 paise to close at 95.96 against the US dollar, pressured by higher crude oil prices, a stronger greenback and heavy domestic equity selling. Rising US bond yields and geopolitical uncertainties also weighed on investor sentiment

Mumbai: The rupee weakened by 23 paise to settle at 95.96 (provisional) against the US dollar on Thursday, dragged down by a surge in crude oil prices and a strong greenback amid geopolitical uncertainties.

According to forex traders, the domestic currency was also weighed down by heavy selling in domestic equity markets as investors turned risk-averse, boosting demand for the dollar, even as rising inflation concerns pushed US bond yields higher.

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At the interbank foreign exchange market, the rupee opened at 95.84 and touched an intraday low of 95.98 against the American currency. The unit finally ended the session at 95.96 (provisional), down 23 paise from its previous closing level.

The rupee had closed 11 paise lower at 95.73 against the US dollar on Wednesday, a day after appreciating by 16 paise.

Aamir Makda, Commodity & Currency Analyst at Commodity Technical Research, Choice Broking, said the rupee dropped sharply, compounding recent losses under pressure from surging Brent crude oil prices and a robust US dollar, which gained momentum as expectations of further Federal Reserve rate hikes mounted.

“In the US, surprisingly resilient purchasing managers’ index (PMI) data reignited inflationary fears, while weak demand at a five-year Treasury debt auction drove yields significantly higher — the 10-year yield surged over 15 basis points from Tuesday’s settlement, while the five-year yield crossed 5 per cent for the first time since 2007,” Makda said.

“The immediate resistance rests at the psychological 96.00 threshold, where a clean breakout could trigger accelerated depreciation for the rupee, while immediate downside support sits around 95.43,” he added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, traded at 100.99, up 0.18 per cent.

Brent crude futures, the global oil benchmark, were trading sharply higher by 2.74 per cent at USD 105.90 per barrel, compared with around USD 72 per barrel in late February before the Iran war.

Analysts said oil prices, which had begun stabilising in recent sessions, climbed again past USD 100 a barrel due to a lack of diplomatic progress in West Asia peace efforts after US and Iranian officials met on the sidelines of the UN General Assembly in New York.

US President Donald Trump, during an address to the annual gathering on Tuesday, threatened that the US might “annihilate” the Islamic Republic if a deal could not be reached. A day later, Iranian President Masoud Pezeshkian, in his speech at the UN, said his people had been “victims of terrorism” by the US.

On the domestic equity market front, the Sensex tanked 1,247.71 points, or 1.67 per cent, to settle at 73,580.54, while the Nifty plunged 383.70 points, or 1.64 per cent, to 23,063.10.

Foreign Institutional Investors (FIIs) purchased equities worth Rs 1,617.45 crore on a net basis on Wednesday, according to exchange data.