The Indian rupee fell 16 paise to Rs. 94.90 against the US dollar in early trade on 24 June, continuing its three-session losing streak, amid a rally in the US dollar to a one-year high. While Brent crude fell to $76.47 per barrel.
Investors increasingly priced in a tighter monetary policy from the Federal Reserve as the US Dollar Index (DXY) reached 101.52 for the first time in over a year.
Expectations of a US rate hike continued to build with Fed officials sounding increasingly hawkish as the economy remains strong. Markets are now expecting a 36% chance of a hike at the July meeting, up from 8.5% a week ago, according to CME FedWatch. For September, the chance of a rate hike has risen above 70% from 29.1%.
Also, 9 of the 19 members of the Fed's rate-setting committee believe there will be at least one additional rate hike this year.
The 2-year US Treasury yield has risen to its highest level in more than 16 months on the back of higher rates in the US, making dollar-denominated assets more appealing and cooling capital inflows into emerging-market currencies, such as the rupee.
Brent Crude extended its monthly correction to nearly 16.5%, while WTI was trading at $72.52 per barrel. The drop comes after growing hopes for a deal between the US and Iran and reports that oil tankers are gearing to cross the Strait of Hormuz.
Lower oil prices reduce the import bill, which will help India's current account balance and keep inflation in check, a positive for the rupee.
Foreign institutional investors (FIIs) continued to be net buyers in the Indian equities market, buying into shares worth Rs. 17.86 crore on June 23, exchange data shows.
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USD/INR has been in a bullish trend with the dollar buyers dominating the market.
"The rupee opened weaker against the dollar, extending its third straight session of pressure as the greenback stayed broadly firm. Early trade suggests the pair may remain biased higher as importer demand and dollar buying continue to outweigh selective exporter supply," Kaveri More, Commodity Analyst Technical Commodity Analyst at Choice Broking, said.
"A sustained break above 95 could open the door toward 95.50 and then 96.00, while immediate support is seen around 94.10-94. Near-term direction will likely hinge on broader dollar sentiment, crude oil trends, and foreign portfolio flows, with the RBI's presence also keeping volatility in check. For now, the market tone remains cautious, and dips may be used to rebuild long dollar positions," she added.