The sharp rise in global oil prices has raised concerns about its impact on domestic inflation, with Indian securities hitting an 18-month high.
India imports 80 per cent of its oil needs and higher prices increase import inflation and have a far-reaching impact on prices in other sectors.
The Reserve Bank of India cut its full-year inflation estimate to 5.3 per cent from 5.7 per cent in its policy assessment on Friday, but global crude and other commodity prices were wary of the impact of inflation.
“The rally in crude oil continues. Until there is some rest, the rupee and bonds will be under pressure. It remains to be seen whether the Reserve Bank will come to protect the rupee,” said a senior trader at a private bank.
The rupee ended at 75.3550 / 3650 against the dollar after touching a modest 75.3950, which was the weakest since July 14, 2020. It was 74.9850 on Friday.
The rupee ended above 75.81 against the dollar, targeting a return to 76.92, the lowest level ever, a Reuters market analyst wrote on Monday.
Oil prices rose 2 percent, prolonging several weeks of gains, and the energy crisis that has engulfed key economies showed no signs of booming in economic activity and easing among controlled commodities from major producers.
Traders on Friday saw yields on U.S. bonds rise for several months, hurting sentiment for local bonds.
India’s key index, the 10-year bond yield session, closed at a peak of 6.34 per cent, the highest since April 17, 2020. Yields closed at 6.32 percent on Friday.
Analysts said the Reserve Bank’s decision not to pursue its government securities acquisition plan in the third quarter, instead of buying provisional securities, will put pressure on long-term yields in the future.