The Indian rupee fell 77 paise to 95.71 against the dollar on Monday — its biggest single-day decline in a month — driven by higher oil prices. The currency gave up most of Friday’s gains, which had logged its biggest one-day rise in two months following the government’s and the Reserve Bank of India’s measures to support it.
Oil prices jumped about 4% on Monday to $96.88 a barrel after fresh strikes between Iran and Israel. Later in the day, Iran’s military said it would stop strikes on Israel but warned that continued attacks on Lebanon would prompt a harsher response.
“There are two main drivers behind the rupee’s weakness today (Monday). First, crude oil prices have risen. Secondly, the dollar index has strengthened on account of risk-off sentiment,” said Dilip Parmer, research analyst, HDFC Securities.
The dollar index climbed back toward the 100 level last week after two months. On Monday, it rose as much as 100.21 before falling to 99.89.
In the calendar year so far, the currency has declined 6.5%. Over the past year, it has depreciated 10.4%.
On Friday, the central bank unveiled a raft of measures to support the currency, alongside the government’s tax cut on foreign investments into government securities. These measures are expected to bring inflows around $40-50 billion.
Parmer added that, ultimately, as long as the rupee stays above 96, there’s a likelihood it may strengthen. “I expect it to trade in a broad range of 94.50 to 96.50 over the next week.”
“The rupee’s weakness was caused by the escalating US–Iran conflict and rising crude oil prices. I expect that these are all temporary reasons, and the rupee should go back to a 94.5 level due to steps taken by the RBI and the government,” said Amit Pabari, managing director, CR Forex.
