Indian rupee's familiar push-pull set to persist with oil pressure, RBI response

MUMBAI: The Indian rupee is likely to open little changed on Tuesday, caught once again between pressure from higher oil prices, dollar demand from companies looking to hedge their FX exposure and the central bank’s persistent presence in the market.

The Indian rupee is expected to open in the 94.48 to 94.50 range, per traders, having settled at 94.4850 to the dollar on Monday.

The rupee’s move from around 95.70 to 94.50 has lost momentum, with rising oil prices and renewed importer hedging putting a brake, bankers said.

Importers have used the rupee’s recovery to lock in dollar requirements, while the prospect of costlier crude keeps demand for hedging high.

The Reserve Bank of India, which helped drive the initial rally through persistent dollar sales, remains present in the market.

Its role in recent sessions has shifted toward absorbing pressure from oil and higher US Treasury yields rather than actively pushing the rupee higher, bankers said.

The RBI is quite active around the 94.50 level for now, a currency trader at a bank said.

Oil and importer demand is making it harder to push dollar/rupee lower, and the RBI may be more comfortable defending these levels, he added.  

Oil pressure persists

Oil prices inched up on Tuesday, with Brent crude near $97 a barrel with escalating US-Iran tensions and threats to Gulf energy infrastructure raising the risk of supply disruptions through the Strait of Hormuz.

Brent crude had rallied nearly 8% last week. Goldman Sachs raised its Brent forecasts by $5 a barrel, to $85 for December 2026, and to $80 for 2027, assuming Middle East shipping disruptions persist into next year.

Risks to the forecasts remain significantly skewed higher, particularly in the near term, the bank said, with Brent potentially climbing to $120 in its upside scenario.