Rupee rises 13 paise against US dollar: What’s driving the move

The Indian rupee opened 13 paise stronger against the US dollar on Friday (July 10), supported by softer crude oil prices and broad-based weakness in the US dollar.

The domestic currency opened at 95.26 per US dollar, compared with Thursday’s (July 9’s) closing level of 95.39, gaining 13 paise in early trade.

The rupee has traded in a 94.96-95.60 range so far this week, with its movement largely influenced by developments in the West Asia. While renewed military exchanges between the United States and Iran weighed on sentiment, market participants said likely intervention by the Reserve Bank of India helped limit losses.

Softer crude oil supports rupee

Crude oil prices eased after recent volatility, offering support to the Indian currency. Brent crude was trading around $76.34 a barrel, down about 2% on Thursday after rallying earlier in the week.

Oil prices have fluctuated sharply between $71 and $80.50 a barrel this week amid heightened geopolitical tensions. Since India imports the bulk of its crude oil requirements, lower oil prices generally reduce import costs and are considered positive for the rupee.

West Asia tensions remain a key risk

Despite Friday’s (July 10’s) stronger opening, traders said the rupee’s near-term direction will continue to depend on developments in the West Asia and their impact on global crude oil prices.

Fresh military tensions escalated after Iranian armed forces launched attacks on US military infrastructure in Gulf states in response to earlier US strikes, adding to uncertainty in energy markets.

Market participants said any further escalation over the weekend could keep the rupee under pressure.

Dollar weakens globally

The rupee also drew support from weakness in the US dollar. The greenback declined against major and Asian currencies as US Treasury yields eased from recent highs, reducing demand for the safe-haven currency.

Analysts said the combination of lower oil prices and a softer dollar helped the rupee recover at the opening, although geopolitical developments remain the key factor driving currency markets in the near term.

-With Reuters inputs