Rupee falls 25 paise to 95.33 as crude above $100 raises import bill concerns

The rupee weakened by 25 paise to 95.33 against the US dollar in early trading on Thursday as crude oil remained above $100 a barrel, heightening concerns over India’s import costs.

At the interbank foreign exchange market, the domestic currency opened at 95.15 before slipping to 95.33 against the dollar. It had closed 34 paise lower at 95.08 in the previous session.

Currency traders said expensive crude oil and continued demand for dollars affected market sentiment.

“Rupee’s move beyond the psychologically important 95 level also triggered some additional dollar demand and stop-loss activity. However, the decline was contained by RBI intervention,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

Brent crude futures declined marginally by 0.23 per cent to $100.98 a barrel. Oil prices remained elevated amid escalating tensions between the United States and Iran and concerns over possible disruption to supplies through the Strait of Hormuz.

Amit Pabari, Managing Director of CR Forex Advisors, said India’s heavy dependence on imported crude left its currency vulnerable to sustained increases in oil prices.

“For an economy that imports nearly 90 per cent of its crude, every USD 10 rise in oil can add roughly USD 12–15 billion to the annual import bill, putting further pressure on the current account and the rupee. With FCNR-related dollar inflows no longer available to offset this pressure, sustained high oil prices could weigh more heavily on the currency,” he said.

Pabari said the rupee had entered a phase in which temporary support from foreign currency non-resident deposits had largely diminished as global pressures intensified.

“The break above 95.00 is technically significant. The expectation is that if USD/INR sustains above 95, the probability of a move towards 95.50 has increased, followed by 96.00 if the momentum continues,” he added.

The dollar index, which measures the greenback against six major currencies, declined 0.09 per cent to 98.72.

Domestic equities traded largely flat, with the Sensex gaining 38.07 points to 74,809.95 and the Nifty rising 9.85 points to 23,439.20 in early deals.

Foreign institutional investors recorded net equity sales of Rs 582 crore on Wednesday, according to exchange data.

With PTI inputs