The rupee even weakened as the dollar struggled to find a strong position on Thursday after its biggest week-long jump in the previous session supported by optimistic US data and aggressive comments from policymakers.
Bloomberg showed domestic currency trading at 81.6488, after opening slightly weaker at 81.5375, compared to the previous close of 81.5200.
On Tuesday, the rupee appreciated 20 paise to end at 81.62 against the US dollar, according to PTI.
The forex market was closed on Wednesday due to Dussehra.
PTI reported that the rupee fell 4 paise in value to 81.66 against the US dollar in early trading amid high volatility as rising crude oil prices weighed on the local unit.
Sriram Iyer, Senior Research Analyst at Reliance Securities, told PTI that the rupee opened stronger following a decline in the dollar over the past two sessions. In addition, Asian and emerging markets were also stronger and supportive this Thursday morning.
However, higher crude oil prices, aggressive rhetoric from Fed officials and JP Morgan’s decision to delay the inclusion of Indian bonds in the global index weighed on the local unit, Iyer added.
A rise in oil prices reiterated that the inflation struggle remains the broader theme among global central banks.
With India importing more than 80 percent of its oil needs, the rise in crude prices will add to the country’s inflation problems and growing current account deficit.
Also unsuccessful was the reversal in market expectations for a slowdown in aggressive rate hikes after US service sector data showed an expansion in September, with a strong labor market and a narrowing trade deficit there.
San Francisco Fed President Mary Daly reiterated that the main concern of policymakers is to contain inflation while downplaying market expectations for rate cuts in 2023.
“I think that just reminded people that you might be a little premature to price in rate cuts in the US,” Imre Speizer, currency strategist at Westpac, told Reuters.
“That pushed interest rates up and the US dollar soar,” he said, as the Federal Reserve’s aggressive measures to curb inflation set the pace for central banks around the world.
“It’s one trade for the whole world,” said Mr Speizer. “The interest rates of no currencies are really capable of doing their own thing on their own.”