The rupee weakened and government bond yields hardened on Tuesday, tracking the rise in crude oil prices, said dealers. The rupee depreciated by 0.38 per cent to settle at 94.55 per dollar, against the previous close of 94.19 per dollar.
Market participants said that state-owned banks bought dollars, likely on behalf of the Reserve Bank of India (RBI) — a move which avoided further depreciation.
The local currency has depreciated by 4.94 per cent against the greenback in the current calendar year (CY26) so far. However, in April so far, it has appreciated 0.28 per cent.
“With crude oil prices hovering above $111 per barrel, demand for dollars to fund oil imports is expected to remain elevated. The rupee appears vulnerable to rising oil prices, while persistent outflows from foreign portfolio investors (FPIs) and other sources continue to exert downward pressure on the currency,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.
Brent crude oil prices rose by 2.62 per cent to $111.07 per barrel, while the dollar index rose by 0.25 per cent to 98.73. The dollar index measures the strength of the greenback against a basket of six major currencies.
Oil prices rose in Asian trade on Tuesday as the standoff between the US and Iran showed little sign of easing, with US President Donald Trump rejecting Tehran’s proposal to reopen the Strait of Hormuz, keeping the critical shipping route largely shut in the near term.
Meanwhile, the yield on the benchmark 10-year government bond rose by 4 basis points (bps) to settle at 6.98 per cent, against the previous close of 6.94 per cent.
Market participants said that yields may be nearing near-term peak levels, with the benchmark yield likely to hover around the 7 per cent mark in the coming sessions, barring any significant change in oil prices.
“Bond yields hardened sharply on the back of rising crude oil prices and ongoing disruptions in the oil market, and are now approaching near-term peak levels, with the benchmark likely to hover around 7 per cent for the time being,” said a dealer at a primary dealership.
Traders now eye the US Federal Reserve meeting outcome for further cues.