Mumbai: The Indian rupee and government bond prices fell on Monday as a surge in global crude prices following a drone attack on Saudi Arabia's oil facilities stoked inflationary and fiscal slippage concerns.
Having opened at 71.57 to a dollar, the Indian currency touched a high of 71.68. Local currency closed at 71.60, down 0.94% from Friday's close of 70.93.
The yield on the 10-year Indian government bond surged 9 basis points to 6.707% compared with the previous close of 6.637%. Bond yields and prices move in opposite directions.
Global benchmark Brent crude futures soared nearly 20% or $11.7 to $66.91 per barrel in early trade, while US West Texas Intermediate crude futures jumped $8.49, or 15.48%, to $59.76 per barrel.
Analysts said the surge in crude prices coincides with the slowdown in the domestic economy and a persistent rise in consumer price inflation, and therefore is a cause of concern. Recent data showed that retail inflation touched a 10-month high of 3.21% in August.
According to Karan Shah DGM Commodity & Currency Research, Indiabulls Ventures Ltd, Commodity & Currency Research, Indiabulls Ventures Ltd. The above event may act negatively for India which imports the majority of the commodity to meet its demand. Crude contributes a major chunk to India's import bill. Higher crude prices may result in rupee depreciation against the dollar. We expect spot dollar-rupee to trade higher within a range of 70.8-71.9 for the immediate near term.
Meanwhile, the benchmark equity index Sensex fell 0.70% or 261.68 points to close at 37123.31 points. So far this year, the index has risen 2.92%.
In the year so far, the rupee has weakened 2.55%, while foreign investors have bought nearly $6.79 billion in Indian equities and $4.65 billion in debt.
Other Asian currencies also traded lower. Indonesian rupiah fell 0.53%, South Korean won 0.53%, Philippines peso was down 0.52%, China Offshore 0.23%, Taiwan dollar 0.11%, Hong Kong dollar 0.03%. However, Japanese yen was up 0.38% and China renminbi 0.18%.
The dollar index, which measures the US currency’s strength against a basket of major currencies, was at 98.397, up 0.14% from its previous close of 98.257.