The Indian rupee opened at 94.47 against the US dollar on Thursday, marking a slight depreciation of 1 paisa from Wednesday’s close of 94.46. This follows an eight-session rally, where the rupee recovered from around 96.60-96.70 to its strongest level since early September. The rally has been driven by Reserve Bank of India (RBI) measures, dollar-selling interventions, and flows linked to the Jio Platforms initial public offering (IPO). However, rising crude oil prices pose a significant risk to this recovery.
The RBI’s intervention in the foreign exchange market has been crucial in managing dollar demand and supporting the rupee. The Jio Platforms IPO also attracted strong institutional investor demand, potentially leading to dollar sales to fund rupee investments. Additionally, traders unwinding dollar-buying positions after the rupee breached the 94.70-per-dollar level has provided further support.
Brent crude prices rose around 1.5% on Thursday to above $110.50 a barrel, driven by geopolitical tensions and supply concerns. Higher oil prices increase dollar demand from importers, putting pressure on the rupee. Persistently expensive crude could also raise India’s import bill and add to inflationary pressures.
The outlook for the rupee remains uncertain. Continued RBI intervention and IPO-related flows could support the currency, but importer demand for dollars and crude oil prices will play a key role. A treasury official warned of a material risk of the rupee reversing its rally if oil-price pressures intensify.