Rupee opens 6 paise lower at 96.63 against US dollar

The rupee opened 6 paise lower at 96.63 against the US dollar on Friday, 24 July, as a sharp rally in crude oil prices heightened concerns over India's external balances and inflation outlook. The domestic currency is now at risk of slipping past its record low after Brent crude climbed above $100 a barrel.

Brent crude surged 7% on Thursday, crossing the $100-a-barrel mark for the first time in two months, as escalating geopolitical tensions raised fears of fresh supply disruptions.

The latest trigger came after Yemen's Houthi rebels claimed responsibility for attacks on two Saudi oil tankers in the Red Sea, exacerbating concerns over global energy supplies at a time when shipping through the Strait of Hormuz remains severely disrupted.

The recent rally marks a sharp reversal from just a few weeks ago, when Brent crude was trading near $70 a barrel. Lower oil prices had helped the rupee strengthen towards the 94-per-dollar mark, while optimism surrounding the Reserve Bank of India's capital inflow measures had improved sentiment towards the currency.

However, the renewed surge in crude prices has overshadowed those positive developments. As the world's third-largest crude oil importer, India remains particularly vulnerable to higher energy prices, which can widen the current account deficit, stoke inflation and increase demand for dollars.

The earlier decline in oil prices, combined with the RBI's measures to attract overseas capital, had supported debt inflows and helped moderate foreign equity outflows. The latest spike in crude prices now threatens to reverse those gains, adding fresh pressure on the rupee.

According to market experts, geopolitical tensions remain a key risk for global financial markets. US President Donald Trump has warned that Iran will be held responsible for any future attacks by Yemen's Houthi rebels and said he is considering a large-scale strike on Tehran. The comments came as the US carried out its 12th consecutive night of strikes on Iran, indicating that the conflict continues to widen rather than de-escalate.

Experts said the rupee is facing pressure not only from higher crude oil prices but also from a broader shift towards safe-haven assets. The US 10-year Treasury yield has climbed to around 4.70%, reflecting renewed inflation concerns, while global equity markets have weakened amid risk-off sentiment. As investors move capital towards safer assets, emerging market currencies, including the rupee, are likely to remain under pressure.

According to experts, markets are also closely watching developments on the India-US trade agreement. The temporary tariff arrangement, which includes an additional 10% US duty on certain Indian exports, was due to expire on July 24, with negotiations reportedly still ongoing. A successful agreement could provide relief for exporters and improve investor sentiment, while any delay or failure to reach a deal may add another layer of uncertainty at a time when the rupee is already grappling with elevated oil prices and geopolitical risks.

Amit Pabari, MD, Research Team, CR Forex Advisors, said, as crude oil has moved in line with our expectations, we expect the rupee to follow the same path. With Brent near $100 and geopolitical risks still elevated, USDINR is expected to move beyond the 97.00 level, with 97.50 likely in the near term.

On the downside, the 96.00–96.10 zone is expected to provide the first key layer of support.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.

Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her foc...