FX.co ★ Rupee Extends Slide to Two-Week Low

The Indian rupee weakened to about 95.7 per US dollar, marking its fourth straight session of losses and slipping to a two-week low, as a sharp rise in crude oil prices and higher US Treasury yields pressured the currency. Brent crude gained nearly 12% this week, approaching $110 a barrel, after escalating tensions in the Middle East disrupted shipping through the Strait of Hormuz and the Red Sea. This has heightened concerns about India’s external balance, as well as its growth and inflation outlook.

At the same time, US Treasury yields climbed after stronger-than-expected producer price data increased expectations of a Federal Reserve rate hike next week. Markets are now pricing in roughly a 70% probability of a rate increase, with the 10-year yield nearing 5%.

The rupee’s slide comes despite recent support from the Reserve Bank of India, which had helped the currency firm from around 95.70 to a two-month high of 94.30 last week, buoyed by stronger-than-expected inflows into overseas Indian deposits. However, traders noted that the RBI appears increasingly reluctant to intervene aggressively as external pressures build.