Mumbai: The Indian rupee weakened to a near record low in the opening trade against the US dollar on Tuesday after crude oil prices surged to a near four-year high. At 9.15am, the rupee was trading at 72.95 to a dollar, down 0.44% from its Friday’s close of 72.63. The home currency opened at 72.96 per dollar. Traders were concerned that higher oil rates may lead to a fiscal slippage and increase inflationary pressures, which could raise the chances of another rate hike by the Reserve Bank of India (RBI) in its October meeting.
Brent crude breaches $81 a barrel — its highest level since November 2014 — on the back of a tightening oil market and OPEC leaders signaling they won’t be immediately boosting output.
Traders are cautious ahead of the US Federal Reserve’s policy meeting outcome on Wednesday that will likely see interest rates increased for the third time this year, with markets increasingly pricing for another one in December.
The 10-year gilt yield stood at 8.131%, below its previous close of 8.122%. Bond yields and prices move in opposite directions
“Bond markets were acutely impacted by firming crude prices. The concurrent depreciation in the rupee deepened the weakness in the gilts”, said Edelweiss Finance in a note.
Benchmark Sensex Index rose 0.3% to 108.99 points. Year to date, it gained 6.6%.
So far this year rupee has declined 12.2%, while foreign investors have sold $1.11 billion and $6.72 billion in the equity and debt markets, respectively.
Asian currencies were trading lower as $200 billion of American tariffs on Chinese goods took effect and China said it won’t hold trade talks with the U.S. unless President Donald Trump stops his threats.
Indonesian rupiah was down 0.28%, Philippines peso 0.19%, Malaysian ringgit 0.1%, China renminbi 0.09%, Thai Baht 0.09%. Singapore dollar and Japanese yen were down 0.04% each. However, South Korean won and China Offshore were up 0.09% each and Taiwan dollar rose 0.07%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.329, up 0.15% from its previous close of 94.185.
Bloomberg contributed to this story