Indian Rupee Pressured by Oil Prices and Foreign Outflows

The Indian Rupee (INR) is trading narrowly against the US Dollar (USD), hovering around the 96 mark. This comes as high crude oil prices and foreign fund outflows continue to put pressure on the currency. The Reserve Bank of India (RBI) has been stepping in to curb excessive volatility, but the rupee remains under strain.

On Monday, the rupee opened at 96.20 and dropped to 96.26, a slight decline from its previous close. Analysts note that the rupee's weaker-than-expected position reflects broader macroeconomic challenges, including elevated import bills and a stronger dollar. The rupee last closed at its weakest point in over two months, at 96.25 per USD.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, highlighted that the rupee's outlook remains pressured by factors like Brent crude prices above $100 and rising US yields. He also noted heavy foreign portfolio selling, which is expected to continue. Meanwhile, the RBI’s forex reserves dropped by $18.343 billion to $747.557 billion in the week ending September 25.

The RBI is anticipated to raise interest rates by 25 basis points this week, a move that could provide some support to the rupee. However, traders expect continued dollar buying by oil companies and sustained selling by foreign institutional investors (FIIs). The Sensex and Nifty saw gains in early trade, rising 413 points and 131.55 points, respectively.