Rupee Crosses 86 Mark At Open As Dollar Index, Oil Prices Surge

On a challenging trading day, the Indian rupee fell beyond the significant 86 per dollar mark at the opening, as market pressures continued to mount. The rupee, which has faced persistent declines, opened at 86.20 against the US dollar, a drop of 5 paise from its previous close of 85.97.

Friday marked the rupee's third consecutive day closing at a record low. The recent depreciation raised concerns as the dollar index climbed to over a two-year high, fueled by economic data from the US. The currency had also breached the 86 threshold in the offshore non-deliverable forwards market earlier.

According to financial analyst Amit Pabari, the Reserve Bank of India (RBI) usually intervenes to stabilize the rupee during sharp declines. However, constraints like liquidity shortages can limit the effectiveness of such interventions. Despite these challenges, the RBI stepped in at the 86.20 level to signal its commitment against excessive depreciation.

Impact of Economic Data

The dollar index, which reflects the greenback's strength against six major currencies, surged to 109.97 on Friday. This marks the highest point since November 10, 2022. The increase was attributed to US employment data that exceeded expectations—adding 256,000 jobs compared to the 227,000 in November, while economists had predicted slower growth of about 160,000.

This robust employment report has raised expectations that the US Federal Reserve might delay the anticipated interest rate cuts. According to the CME FedWatch Tool, there is a 93.1% likelihood that interest rates will remain unchanged in the upcoming January meeting. Previously, it was predicted that the Fed would roll out cuts totalling 45 basis points throughout the year. Now, traders expect a more modest reduction of just 30 basis points.

Oil Prices and Their Influence

Further complicating the situation, crude oil prices have seen a notable rise. In Asian trade, they jumped to $81.49 per barrel, marking the highest level since October 28, 2024. This increase follows new sanctions imposed by the US on Russian oil supplies, which affect India and China and raise concerns about global oil availability.

As a result, the Indian rupee is projected to oscillate between 85.90 and 86.20 throughout the trading day. Anil Kumar Bhansali, executive director of Finrex Treasury Advisors LLP, noted that exporters will likely exercise caution while holding their positions due to ongoing demand for dollars, while importers may seize opportunities to buy on dips.

The situation continues to evolve as market participants monitor key economic indicators and geopolitical developments.

Rupee, Dollar, Oil