Rupee falls to 96.17 against dollar for first time: What is driving the slide

The Indian rupee opened at a record low of 96.17 against the US dollar on Monday (May 18), compared with Friday’s close of 95.97, as surging crude oil prices and rising US Treasury yields weighed on investor sentiment and triggered selling across emerging-market assets.The decline comes amid escalating tensions in the West Asia, which have pushed Brent crude above $111 per barrel and heightened concerns over inflation and global growth. Higher oil prices are particularly significant for India, which relies on imports for most of its crude requirements.

The rise in US bond yields added to the pressure on Asian currencies. The benchmark 10-year US Treasury yield climbed to 4.625%, extending gains from the previous session as investors reassessed the likelihood of prolonged inflation and tighter monetary conditions.
Traders said the Reserve Bank of India (RBI) likely intervened in the foreign exchange market on Friday (May 15) to curb excessive volatility after the rupee slipped past the 96-per-dollar mark. Market participants expect the central bank to continue managing sharp swings rather than defending any specific currency level.Regional currencies and equities also weakened, reflecting broader risk aversion. Analysts said stronger dollar demand and higher real yields in the US have reduced appetite for emerging-market currencies.

The pressure on the rupee has coincided with weakness in India’s bond market. The benchmark 10-year government bond yield rose last week as investors factored in the impact of expensive crude on inflation, fiscal balances and the current account deficit.

Economists said sustained oil prices at elevated levels could complicate India’s macroeconomic outlook by increasing imported inflation and widening external deficits. Concerns over disruptions in the Strait of Hormuz, a major global energy transit route, have further intensified market caution.

-With agencies inputs