Rupee Struggles Amid Elevated Oil Prices and Importer Demand
India's rupee continues to struggle against the US dollar despite a broader decline in the greenback, according to OCBC strategists Sim Moh Siong and Christopher Wong. Elevated oil prices and importer demand for dollars are weighing on the currency.
The Reserve Bank of India (RBI) has been selling dollars linked to its sales, which has helped contain losses and keep the USD/INR pair from rising further. However, this support may soon be removed as the RBI's concessional FCNR(B) swap window closed earlier than expected at the end of August.
The strategists note that the rupee has struggled to benefit fully from the weaker dollar backdrop due to high oil prices, which are a major headwind for India given its import dependence. Unless crude prices ease more meaningfully, the rupee may continue to lag behind other Asian currencies.