Forex traders said surging U.S. bond yields are rattling global investors. Moreover, the narrowing yield differential between India and the U.S., is making Indian assets less attractive. Representational file image.
| Photo Credit: The Hindu

Rupee depreciated 37 paise to close at 85.96 (provisional) against the U.S. dollar on Thursday (May 22, 2025), on dollar demand from importers and foreign banks as well as surge in crude oil prices.

Forex traders said surging U.S. bond yields are rattling global investors. Moreover, the narrowing yield differential between India and the U.S., is making Indian assets less attractive.

Besides, elevated crude oil prices amid rising geopolitical tensions in the Middle East, further dented investor sentiments.

At the interbank foreign exchange market, the rupee opened at 85.59 then touched an intra-day high of 85.58 and a low of 86.11 against the U.S. dollar. The domestic unit settled for the day at 85.96 (provisional), lower by 37% over its previous close.

On Wednesday (May 21, 2025), the rupee settled at 85.59 against the greenback. In the last three trading sessions, the rupee has declined 54 paise.

“The Indian rupee has ebbed for a third straight session, influenced by importers’ appetite for the dollar and the unwinding of short positions after a key technical level was breached,” said Dilip Parmar, Senior Research Analyst, HDFC Securities.

Mr. Parmar further added that “a prevailing inclination towards risk aversion, alongside carry trades involving the Japanese yen, additionally exerted downward pressure on the domestic rupee”.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.25% at 99.80.

Brent crude, the global oil benchmark, fell 1.45% to $63.97 per barrel in futures trade.

“The spot USD-INR rate has retraced to its 100-day simple moving average in today’s session. Advancement beyond the 86.11 threshold might propel it into the 86.30 to 86.45 spectrum. Conversely, the 85.60 mark now acts as a prospective support,” Mr. Parmar said.

In the domestic equity market, the 30-share BSE Sensex declined 644.64 points, or 0.79%, to close at 80,951.99, while the Nifty fell 203.75 points, or 0.82%, to 24,609.70.

Foreign institutional investors bought equities worth ₹2,201.79 crore on Wednesday (May 21, 2025).