Rupee gains on fall in crude and dollar index; bond yields harden

The rupee strengthened after three days of losses on easing crude and dollar index, while bond yields hardened on higher-than-expected SDL auction cut-offs

After weakening for three straight sessions, the rupee appreciated on Tuesday, helped by a decline in crude oil prices after US President Donald Trump announced a five-day pause on his earlier threat to target Iranian power and energy infrastructure, signalling a possible move towards a peace deal.

 

The Indian currency opened stronger at 93.63 to the dollar, tracking the overnight fall in the dollar index and crude oil prices, but gave up part of its gains to settle at 93.87 per dollar by the end of the day. It had closed at 93.97 per dollar the previous day. 

So far this financial year, the rupee has depreciated 8.95 per cent against the greenback. It is down 4.26 per cent this calendar year and 3.08 per cent so far in March. 

 

“The market has welcomed the five-day pause, but not with conviction. Any signs of further de-escalation could pull the dollar-rupee lower. In contrast, a further escalation might keep the rupee under pressure. The direction for now will be dictated by how the situation unfolds,” said Amit Pabari, managing director at CR Forex.

 

US President Donald Trump said productive talks had taken place over the weekend with the Iranian regime on ending the West Asia conflict. He said he would defer possible strikes on Iranian energy facilities by five days to assess the progress of the negotiations. Iranian authorities, however, denied that any such discussions had taken place.

 

Brent crude oil prices hovered just above the $100 a barrel, lower than Monday’s peak of $114. The dollar index, which measures the greenback’s strength against a basket of six major currencies, also fell to 99.30 from the previous day’s 100.10.

 

“The rupee appreciated to 92.80 against the dollar in the non-deliverable forward market after trading closed on Monday. However, dollar buying by the RBI led to a weaker opening, while Iran’s denial of any talks pushed up crude prices and the dollar index,” said a dealer at a state-owned bank.

 

Meanwhile, the yield on the benchmark 10-year government bond inched up by 4 basis points to settle at 6.87 per cent due to higher than expected cutoff at the weekly state development loan (SDL) auction.

 

State governments continued to tap the market at an elevated pace, with 21 states raising ₹54,834 crore in the auction held on Tuesday, marginally lower than ₹57,525 crore in the previous week but about 14 per cent higher than the amount indicated in the borrowing calendar.

 

The 10-year SDLs issued by Kerala, Punjab, Rajasthan, Sikkim and Tamil Nadu were priced in the 7.55-7.87 per cent range. However, Rajasthan’s 10-year bond yield rose to 7.65 per cent from 7.49 per cent, while Sikkim’s increased to 7.87 per cent from 7.56 per cent. The yield spread between SDLs and government securities rose to 71-103 basis points, compared with 78-85 basis points last week.

 

According to the indicative schedule, states are expected to borrow around ₹5 trillion in the final quarter of FY26 — a 77.3 per cent increase over the December quarter and a 5.6 per cent rise over the April quarter of FY25. So far in this quarter, states have already raised ₹4.83 trillion, or 96.7 per cent of the planned amount, with one more auction slated for March 31.