Rupee under pressure amid oil surge and dollar strength

The Indian rupee opened weaker on Friday (May 15), slipping 11 paise to 95.87 against the US dollar compared with Thursday’s (May 14's) close of 95.76/$, amid sustained pressure from elevated crude oil prices, rising US Treasury yields and persistent foreign fund outflows.

The domestic currency has now fallen for three consecutive sessions and is down about 1.36% this week, as strong dollar demand from oil marketing companies and importers continued to weigh on sentiment.

The rupee had touched a record low of 95.95 per dollar in the previous session before recovering slightly.

Market participants said the rupee remains vulnerable as Brent crude hovered near $107 per barrel,

keeping concerns alive over India’s import bill and inflation outlook. India imports nearly 90% of its crude oil requirements, making the currency highly sensitive to oil price movements.

The pressure on the rupee also intensified after the US 10-year Treasury yield climbed above 4.50%, nearing a one-year high, which boosted the dollar index past 99 and triggered weakness across Asian currencies and equities.

Traders said expectations that the US Federal Reserve may need to keep interest rates elevated — or potentially raise them further — to tackle oil-led inflation have strengthened the dollar globally.

“It could very well be that US yields open up a new leg higher for USD/INR,” a currency trader at a bank said.

Reports suggesting possible measures to boost dollar inflows into India have provided only temporary relief, with the rupee resuming its weakening trend soon after. Bankers also expect the Reserve Bank of India to continue intervening intermittently to curb excessive volatility and slow the pace of depreciation.

Meanwhile, state-run fuel retailers raised petrol and diesel prices by ₹3 per litre, marking the first increase in four years, adding to inflation concerns and potentially increasing pressure on the current account deficit.

Investors are also monitoring developments from the meeting between US President Donald Trump and Chinese President Xi Jinping for cues on global trade and commodity markets.

-With Reuters inputs