The rupee started Thursday on a positive note, rising 0.1% against the US dollar. The currency opened at 96.49 against the dollar, compared to its previous close at 96.56, after ending the last session at its weakest level in more than two months.The modest recovery comes even as the rupee continues to face pressure from rising crude oil prices. Traders expect the currency to remain under pressure during the day, with the rupee moving in the 96.50-96.70 range. However, intervention by the Reserve Bank of India (RBI) is expected to limit steeper losses.“It is difficult to see any tangible recovery in the rupee if oil prices continue to rise like this,” a currency trader at a private sector bank told Reuters.“In fact, given the current news flow, the risk of Brent crossing the $100 mark and rising is increasing.”The rupee has remained under pressure since fresh tensions erupted between the US and Iran, leading to another rise in crude oil prices.Although the Reserve Bank of India’s recent measures have attracted foreign inflows and helped protect the currency from steep losses, traders say these gains are increasingly being offset by the continued rise in oil prices.
Brent crude rose above $96 a barrel, its highest level in six weeks, after the United States carried out another round of strikes on assets linked to Iran and the Houthis in Yemen, including attacks near key shipping lanes in the Red Sea. The Houthis threatened ships carrying Saudi crude, raising concerns about possible supply disruptions.Given the renewed risks to shipments through the Persian Gulf and the threat to Saudi crude exports through the Red Sea, Brent prices at current levels may still be undervalued, ING said in a note.Separately, new data released by the Reserve Bank of India on Wednesday showed that the central bank was a net seller of $6.1 billion in the foreign exchange market in May, when the rupee came under intense pressure from rising oil prices.The Reserve Bank of India bought $22.2 billion and sold $28.3 billion during the month, compared to net dollar sales of $8.9 billion in April.In May, the rupee hit a record low of 96.96 per dollar before recovering on the back of continued RBI intervention and measures designed to boost dollar inflows, including tax cuts on foreign debt investments and incentives for foreign currency deposits abroad.The Reserve Bank of India’s net dollar forward sales rose to a record $106.6 billion at the end of May from $95.3 billion the previous month. Its gold holdings remained unchanged at 880.52 metric tons since May 22.The apex bank also said foreign investors were net sellers in Indian stocks until June, but sentiment improved after measures to support the rupee were announced.According to the bulletin, bond markets attracted foreign inflows in June, which continued until July. Stock markets also recorded inflows this month, while India’s foreign exchange reserves remained sufficient to cover ten months of imports.Meanwhile, Dalal Street opened weakly, with major indices down nearly 0.5% in early trade. The BSE Sensex was trading at 76,520.58, down 234.47 points or 0.31%, while the NSE Nifty50 fell below the 24,000 mark.