Rupee gains 21 paise to 93.72 against dollar: Can the rally sustain

Résumé détaillé

The Indian rupee opened 21 paise higher at 93.72 per US dollar on Wednesday, supported by declining crude oil prices, though rising US Treasury yields could limit further gains.

The Indian rupee opened 21 paise higher against the US dollar on Wednesday, November 11, at 93.72 per dollar, compared with Monday's (November 9) closing level of 93.93. Indian financial markets were closed on Tuesday (November 10) on account of a local holiday.

The domestic currency drew support from a decline in crude oil prices, which eased concerns over India's import bill and dollar demand from oil importers. However, a rise in US Treasury yields following stronger-than-expected US inflation data could limit the rupee's gains.

Brent crude fell below $90 a barrel on Tuesday (November 10) for the first time since August after US officials played down the possibility of further military action against Iran, easing concerns over potential disruptions to oil supplies from the West Asia.

Although crude prices recovered from their lows of $92.20, they remained more than 6% lower this week, following a decline of over 16% last week.

Lower crude prices are significant for India, which depends heavily on imports to meet its oil requirements. Higher crude prices increase the country's import bill and the demand for dollars from oil marketing companies and other importers, putting pressure on the rupee. A sustained decline in oil prices, on the other hand, can ease these pressures and support the domestic currency.

The rupee has also received support from the Reserve Bank of India's measures to manage dollar demand, including a special window for oil refiners to meet their foreign exchange requirements outside the regular market. A revival in foreign equity inflows has further supported the currency.

However, the global interest rate outlook remains a potential headwind. US Treasury yields rose on Tuesday after US consumer inflation for October came in higher than economists had expected. The data prompted traders to increase their bets on a larger interest rate hike by the US Federal Reserve in December.

Higher US yields can make dollar-denominated assets more attractive to…

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