FX.co ★ Rupee Breaches 96 as Hawkish Fed, Oil Weigh

The Indian rupee weakened to about 96.1 per US dollar, extending its decline to multi-week lows as elevated crude oil prices, a stronger greenback, and expectations of further US monetary tightening weighed on the currency. Brent crude traded near $108 per barrel, sustaining strong dollar demand from oil importers, while the yield on the US 10-year Treasury note approached 5%.

Downward pressure on the rupee intensified after the Federal Reserve raised interest rates by 25 basis points on Wednesday—its first hike since 2023—and signaled that another increase could follow later this year. The decision lifted the Dollar Index above 100, its highest level in more than a month, and futures markets were pricing in roughly a 50% probability of an additional Fed rate hike next month.

Foreign portfolio outflows from Indian equities and bonds further undermined the rupee. However, a $703 million allocation of NSE shares to anchor investors, along with continued dollar sales by the Reserve Bank of India, may offer some support to the currency.