Rupee Nears 96 Mark, Falls 31 Paise To 95.95: Why Is Indian Currency Falling Against US Dollar?

The Indian rupee remained under heavy pressure on Friday and moved close to the 96-mark against the US dollar, weighed down by rising crude oil prices, a stronger dollar and escalating tensions in West Asia.

The domestic currency opened at 95.86 in the interbank foreign exchange market and slipped further to 95.95 during early trade, falling 31 paise from the previous close. The rupee had already hit a fresh record low of 95.96 in the previous session before settling marginally higher at 95.64 on Thursday.

Forex traders said the dollar-rupee pair continues to remain under pressure as global investors are rushing towards the US dollar amid uncertainty surrounding the Iran-Israel conflict and fears of supply disruptions in crude oil shipments through

the Strait of Hormuz.

Crude Oil Spike Hurting Rupee

One of the biggest reasons behind the rupee’s weakness is the sharp rise in crude oil prices. India imports more than 85 per cent of its crude oil requirement and a weaker rupee makes imports costlier.

Brent crude, the global oil benchmark, rose 1.3 per cent to trade above $107 per barrel in futures trade. Concerns over oil supply disruptions from West Asia have triggered fresh buying in crude, adding pressure on oil-importing economies like India.

The government’s decision to hike petrol and diesel prices by Rs 3 per litre from Friday also reflects rising stress in the energy market due to elevated global crude prices.

Strong Dollar Adding Pressure

Apart from crude oil, the strengthening US dollar is also hurting the rupee. The dollar index, which measures the strength of the greenback against six major currencies, rose 0.24 per cent to 99.05.

According to Amit Pabari, MD of CR Forex Advisors, the dollar has strengthened after strong US retail sales data and stable labour market numbers reduced expectations of aggressive rate cuts by the US Federal Reserve.

“When global uncertainty rises, investors usually move towards the dollar as a safe-haven asset,” he said.

Trump-Xi Meeting Fails To Calm Markets

Investor sentiment also remained weak after the much-awaited meeting between US President Donald Trump and Chinese President Xi Jinping failed to produce any major breakthrough, especially on the US-Iran issue.

Market participants were expecting some diplomatic progress that could ease geopolitical tensions and stabilize oil prices. However, continued disagreements over Taiwan and China’s oil purchases from Iran kept concerns alive.

Temporary Relief From Bond Tax Proposal

The rupee, however, recovered sharply from its lifetime low on Thursday after reports suggested that India may consider reducing taxes paid by foreign investors on Indian bonds. The move is aimed at attracting foreign capital inflows and supporting the currency.

Foreign institutional investors (FIIs) also turned net buyers on Thursday and purchased equities worth Rs 187.46 crore, according to exchange data.