Mumbai, August 19: The Indian rupee ended slightly weaker against the US dollar on Wednesday, pressured by rising crude oil prices and renewed tensions in West Asia. The domestic currency settled at 95.76 per US dollar (provisional), down 2 paise from its previous close.
The rupee opened at 95.72 and remained in a narrow range of 95.72–95.76 during the trading session. On Tuesday, the rupee had closed at 95.74 against the US dollar after losing 13 paise.
Crude Oil Prices Put Pressure on Rupee
Higher global crude oil prices remained one of the key factors weighing on the Indian currency. India imports a significant portion of its crude oil requirements, meaning a sustained rise in international oil prices can increase the country’s import bill and demand for dollars.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said the rupee has been mildly affected by higher crude prices and strong US bond yields. He added that the currency could remain under pressure as long as crude oil prices stay elevated.
However, he noted that there is limited scope for a sharp depreciation in the rupee because of India’s adequate foreign exchange reserves and stronger-than-expected inflows under the FCNR (B) scheme.
West Asia Tensions Keep Markets Cautious
Geopolitical developments in West Asia also continued to influence investor sentiment. US President Donald Trump said on Tuesday that the United States had no talks planned with Iran, while maintaining that the Strait of Hormuz remained open and operational.
Concerns around the Strait of Hormuz are particularly important for global energy markets because the waterway is a major route for international oil shipments. Any prolonged disruption could potentially push crude prices higher and increase pressure on oil-importing economies such as India.
Dollar Index and Brent Crude
The US Dollar Index was trading at 99.85, up 0.04%, indicating a marginal strengthening of the greenback against a basket of major currencies.
Meanwhile, Brent crude, the global oil benchmark, gained 0.92% to trade at $91.86 per barrel in futures trading.
Higher crude prices, combined with firm US bond yields, can make the dollar relatively attractive and create additional pressure on emerging-market currencies.
Indian Stock Market Declines
Weakness in domestic equities also added to pressure on the rupee. The Sensex declined 325.78 points, or 0.42%, to close at 76,909.68, while the Nifty 50 fell 76.60 points, or 0.32%, to end at 24,078.30.
Despite the decline in equities, foreign investors remained supportive. According to exchange data, foreign institutional investors (FIIs) bought Indian equities worth ₹1,651.53 crore on a net basis on Tuesday.
Such foreign inflows can provide some support to the rupee by increasing the supply of foreign currency in the domestic market.
RBI Intervention Provides Some Support
Forex traders said intervention by the Reserve Bank of India (RBI) also helped limit volatility in the rupee. The central bank’s foreign exchange operations, along with India’s healthy forex reserves and foreign fund inflows, can help prevent sudden and excessive movements in the currency.
For now, market participants are closely watching crude oil prices, developments in West Asia, US bond yields and foreign investment flows to determine the next direction of the Indian rupee.
What Next for the Indian Rupee?
The rupee may continue to face mild pressure if crude oil prices remain elevated and geopolitical tensions persist. A sustained rise in oil prices could increase India’s import costs and widen pressure on the country’s trade balance.
At the same time, strong foreign exchange reserves, RBI intervention and continued capital inflows could help restrict a sharp fall in the domestic currency.
The USD/INR exchange rate is therefore likely to remain sensitive to movements in crude oil, the US dollar, global bond yields and geopolitical developments in the coming sessions.
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