The rupee witnessed its highest decline in a month as it was dragged lower by a strengthened US dollar and a sharp increase in crude oil prices. The rupee fell by 29 paise to end at Rs 83.04 against the dollar on Tuesday, according to data from Bloomberg. Similarly, it had fallen by 33 paise on August 2.
“This depreciation can be attributed to the overall strength of the US dollar and a significant increase in crude oil prices, which surged by more than 10% to reach $85 per barrel,” says Jateen Trivedi, VP research analyst, LKP Securities.
The weakness in the Chinese yuan has put Asian currency markets under pressure and this has led to the weakness in the rupee, say analysts.
“China’s slow performance is prompting new concerns about the country’s economic growth. The Caixin service PMI data from the Chinese economy, issued on Tuesday, was lower than the previous month, thereby putting pressure on Asian currency markets,” says Nirpendra Yadav, senior commodity research analyst, Swastika Investmart.
The South Korean won led losses among Asian currencies, falling nearly 0.9% on Tuesday. Similarly, the Chinese yuan fell 0.4%
“The rise in the dollar index indicates expectations of an impending interest rate hike, and this is impacting currency markets, including the rupee,” says Trivedi. Going ahead, the movement of the rupee will be influenced by Federal Reserve’s meeting, scheduled for later this month, say analysts.
In the near term, the rupee is expected to trade between 82.70 and 83.25, with a bias toward weakness, especially if it faces upward pressure. Traders and investors will monitor developments in the currency and oil markets, and any news related to the Federal Reserve’s policy decisions, to gauge the rupee’s future trajectory.