The Indian rupee opened at 95.22 against the US dollar on Friday, October 30, gaining 4 paise. While a weaker dollar helped, rising crude oil prices limited these gains. A currency trader said, "The jump in oil prices could more than offset this relief," as India faces higher import costs.
The Indian rupee opened marginally higher at 95.22 against the US dollar on Friday (October 30), compared with its previous close of 95.26, gaining 4 paise.
The marginal appreciation comes amid a retreat in the US dollar and a decline in US Treasury yields. However, the rupee's gains remain limited as a fresh surge in crude oil prices raises concerns over India's import bill and demand for dollars.
The dollar index fell to 101.70 as lower US Treasury yields weighed on the US currency. The decline in yields followed a flight to safety in the bond market amid renewed concerns over the returns on large investments in artificial intelligence.
The US two-year Treasury yield fell 8 basis points to its lowest level in seven weeks, while the 10-year yield slipped to 4.90%.
A weaker dollar generally provides some support to emerging market currencies, including the rupee, as it reduces pressure from the US currency.
Why are the rupee's gains limited?
The decline in the dollar and US bond yields has offered some relief to the rupee, but rising crude oil prices remain a concern.
Brent crude futures climbed to $117.84 per barrel amid concerns over supply disruptions after Yemen's Iran-aligned Houthis stepped up attacks on Saudi Arabia.
Higher crude oil prices are a concern for India, a major oil importer, as they can increase the country's import bill and demand for dollars. This can put pressure on the rupee and offset some of the support from a weaker dollar.
A currency trader at a private-sector bank said the support from lower US yields could remain limited as the decline is primarily driven by a flight to safety. The trader added that the jump in oil prices could more than offset this relief.
The rupee's movement will also depend on the Reserve Bank of India's intervention in the foreign exchange market, the trader said.