The Indian Rupee has been under constant pressure due to surging oil prices. The currency opened at the 94.23 mark against the US dollar. While the opening was nearly unchanged from its Friday close, the domestic currency fell to the 94.27 mark against the greenback in early trade.
Why is the rupee under pressure?
The macro factors weighing on the currency remain the same, high oil prices, largely driven by the geopolitical turmoil between the US and Iran, and the closure of the trade route—the Strait of Hormuz.
This waterway passage transits nearly 20% of global energy flows, and India is a net importer of oil, with the country relying on the Middle East to meet a large chunk of its fuel requirements.
Elevated oil prices put pressure on the local currency, as oil is predominantly traded in dollars.
Rupee falls for fifth straight session
The currency has been on a losing streak, with today’s opening marking its fifth consecutive decline. The RBI’s rollback of certain rupee derivative measures also added to the the decline for the currency.
“The rupee remains vulnerable to lower levels as buyers of $ continue to do so, while the RBI keeps a tab on the fall in rupee value,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors LLP, in a note.
Investor caution on the rise
Brent crude futures continue to trade over the $100/bbl mark, keeping the markets cautious. According to NSE data for April 24, foreign investors were net sellers of domestic equities worth Rs 8,827 crore.
So far this year, FPIs have withdrawn over Rs 187,439 crore from the Indian markets, while India’s forex reserves have crossed $703 billion as of April 17.
Dollar Index swings
The dollar index, a measure of the greenback’s strength against a basket of six major currencies, has been soft, trading near the 98/$ mark. However, over the past sessions, it has risen by 0.07%.
“The dollar reflected every twist in sentiment. It surged sharply toward 99.30 as fear drove investors toward safety. But the move didn’t last,” said Amit Pabari, managing director at CR Forex Advisors.
He added that for the rupee, on one hand, a softer dollar offers relief, while on the other side, uncertainty remains the dominant force.
With high oil prices, the greenback continues to be the ultimate winner, emerging as a safe haven for investors.
Outlook for Rupee
Pabari said that any dips are likely to be bought into, with the 92.80–93.20 zone acting as strong support. “On the upside, 93.50 to 94.50 is expected to define the near-term range,” he added.