Rupee falls 9 paise to 94.50 against US dollar as crude oil prices rise

New Delhi: The rupee weakened by 9 paise to 94.50 against the US dollar in early trade on Friday, pressured by a stronger American currency and rising global crude oil prices, even as sustained foreign institutional investor (FII) inflows helped limit losses.

At the interbank foreign exchange market, the domestic currency opened at 94.50 against the greenback, compared with Thursday's closing level of 94.41. It subsequently recovered some ground to touch an intraday high of 94.36.

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The initial weakness came amid renewed demand for the US dollar following encouraging American labour market data and heightened geopolitical uncertainties.

Stronger dollar, higher crude weigh on rupee

The dollar index, which measures the greenback's strength against a basket of six major currencies, rose 0.17 percent to 101.71.

Meanwhile, Brent crude, the international oil benchmark, climbed 2.04 percent to USD 100.30 per barrel in futures trade, raising concerns over India's energy import costs and demand for dollars.

Higher crude oil prices typically put pressure on the rupee as India relies heavily on imported petroleum, increasing dollar demand from oil marketing companies.

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the Bank of England's decision to keep interest rates unchanged and better-than-expected US weekly unemployment claims influenced currency market sentiment.

"We expect the Rupee to trade with a positive bias on strength in domestic markets and fresh FII inflows," Choudhary said.

However, he cautioned that geopolitical tensions involving Russia and Ukraine, along with continuing attacks in the Middle East, could restrict the currency's appreciation.

Foreign inflows offer support

Sustained overseas investment in Indian equities provided a counterweight to the pressure from the stronger dollar and elevated crude prices.

Foreign institutional investors were net buyers of Indian equities worth Rs 14,974.68 crore on Thursday, according to exchange data.

Domestic equity markets opened on a mixed note, with the BSE Sensex rising 33 points to 79,343.06, while the NSE Nifty declined 52.95 points to 24,477.40.

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The rupee's near-term trajectory is expected to depend on movements in the dollar index, crude oil prices, foreign portfolio flows and geopolitical developments.

Latest verification: Moneycontrol reported the rupee opening at 94.51 per dollar on Friday, while Reuters reported Thursday's closing level at 94.4750. These differ from the 94.50 opening and 94.41 closing in the supplied copy. Moneycontrol +1

The opening figures and the corresponding depreciation should therefore be checked against the final interbank market feed before publication.

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