MUMBAI: The rupee on Tuesday closed at a new low against the dollar for the seventh consecutive session, weighed down by elevated crude oil prices, hardening US Treasury yields, and sustained foreign fund outflows.
The Indian currency settled at a record closing low of 96.53 per dollar, compared to the previous close of 96.36. During the day, it touched a fresh intraday low of 96.61.
Yield on the 10-year government bond, which had climbed to a two-year high on Monday, fell 2 basis points (bps) on Tuesday to close at 7.11 per cent. The five-year bond yield declined 5 bps to 6.89 per cent.
The rupee has depreciated nearly 7 per cent in 2026, making it the worst-performing Asian currency. Since the start of the West Asia conflict, it has weakened 6 per cent. Brent crude prices have risen more than 50 per cent since the conflict began.
On Tuesday, Brent was trading at $110.96 per barrel, compared to $109.89 the previous day.
On Monday, Iran proposed ending hostilities across fronts, including Lebanon, and sought the withdrawal of US forces from areas close to Iran, along with reparations for war-related damage. US President Donald Trump had rejected a similar proposal last week.
Amit Pabari, managing director at CR Forex, said the rupee was under pressure from higher crude oil prices, foreign portfolio outflows, and global risk aversion.
Market participants said oil prices remained relatively stable during the day, while the dollar index and Asian currencies did not show significant weakness. However, state-owned banks bought dollars around the 96.27 level and continued purchases up to 96.40, after which short covering in the market added to the move.
“The rupee was expected to stay within the 96.40 range today (Tuesday), but continued dollar buying pushed it to a low of 96.62,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
The yield on the benchmark 10-year US Treasury bond rose to 4.62 per cent, its highest level in more than a year, amid expectations that the Federal Reserve may keep rates elevated for longer. Markets are also pricing in the possibility of another rate increase later this year.
“There has been no correction in the rupee since last month, when it touched 94.91. It has weakened continuously, with the dollar remaining overbought,” Bhansali said.
Market participants said the Reserve Bank of India’s (RBI’s) intervention was largely limited to intraday operations aimed at containing sharp moves. Though India has comfortable foreign exchange reserves of around $697 billion, the central bank is relying not only on spot market intervention but also on the offshore market.
The bond market, meanwhile, is awaiting the RBI’s surplus transfer announcement, expected this week following the central bank’s board meeting.
“The bond market is constantly re-pricing expectations of a rate hike ahead of the RBI policy review. Expectations of a dividend announcement and liquidity support aided short-term bonds, although rising US yields may trigger fresh selling pressure tomorrow (Wednesday),” said a dealer at a primary dealership.
The rate-setting panel will review monetary policy from June 3 to 5. It is widely expected to keep the policy repo rate unchanged, though markets will watch whether the central bank revises its growth and inflation projections for the current financial year in light of the West Asia conflict.
“Market expectations for the RBI dividend are largely in the ₹3.3 trillion-₹3.5 trillion range, with anything below ₹3 trillion seen as a disappointment and above ₹4 trillion viewed as a positive surprise,” the person quoted above added.
Source: Business Standard
