Higher crude prices and foreign outflows push rupee below 96 per dollar

• The rupee fell 16 paise from Monday’s reported close of 95.97 to 96.13 per US dollar in early trade

• Higher crude oil prices, rising US yields and foreign fund outflows weighed on the currency

• Brent crude traded at $106.87 a barrel, while foreign institutional investors sold shares worth Rs 5,353.22 crore on Monday

The rupee weakened past 96 per US dollar in early trade on Tuesday as rising crude oil prices and continued foreign fund outflows put pressure on the currency.

At the interbank foreign exchange market, the rupee opened at 96.03 and fell further to 96.13 against the dollar. That marked a decline of 16 paise from Monday’s reported close of 95.97

Forex traders pointed to the combination of expensive oil and rising US bond yields. Higher yields have made dollar assets more attractive, adding to pressure on emerging-market currencies, while India’s oil import bill is sensitive to increases in crude prices.

Brent crude rose 1.51 per cent to $106.87 a barrel in futures trading amid concerns about disruptions to supplies through the Strait of Hormuz. The dollar index, which measures the US currency against six others, edged up 0.04 per cent to 101.23.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, said the rupee could weaken towards 96.50 in the coming days. A move beyond that level could bring 98 into view, he said, while placing support at 95.50. He added that August’s 8 per cent industrial output growth and demand for the Reserve Bank of India’s bond sales offered some domestic support.

Indian equities also declined in early trade, with the Sensex down 503 points at 72,260.09 and the Nifty falling 151 points to 22,626.50.

Foreign institutional investors sold shares worth Rs 5,353.22 crore on a net basis on Monday, according to exchange data.

With IANS inputs