Rupee holds at 94.04 against dollar: Why oil prices and US yields matter

Résumé détaillé

The Indian rupee opened flat at 94.04 against the US dollar on Friday, pressured by rising crude oil prices and higher US Treasury yields.

The Indian rupee opened flat at 94.04 against the US dollar on Friday, November 13, compared with Thursday's (November 12's) closing level of 94.04, as rising crude oil prices and higher US Treasury yields kept pressure on the domestic currency.

The external environment has turned less favourable for the rupee, with Brent crude prices climbing to around $96 per barrel after falling below $90 earlier this week.

Fresh attacks on Saudi energy infrastructure and disruptions to shipping through the Strait of Hormuz have renewed concerns over global oil supplies.

Meanwhile, the US dollar has gained support from rising Treasury yields. The 10-year US Treasury yield moved above the 5% mark after US President Donald Trump said Washington did not need a deal with Iran.

Higher-than-expected US inflation data has also strengthened expectations of further interest rate hikes by the US Federal Reserve, adding to the dollar's strength.

India imports a substantial portion of its crude oil requirements, making the domestic currency vulnerable to fluctuations in international oil prices.

When crude oil becomes more expensive, Indian oil companies need more dollars to pay for imports. This increases demand for the US currency and can put pressure on the rupee.

Brent crude, which had slipped below $90 per barrel earlier this week, has climbed to around $96 following fresh geopolitical developments in West Asia.

A sustained rise in crude prices could also increase India's import bill, potentially widening the country's trade deficit and adding to pressure on the currency.

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