Indian rupee faces pressure from oil, US yields; RBI deputy flags case for gains
- The Indian rupee is expected to open around 95.85-95.87 per dollar, traders said, down from its close at 95.74 in the previous session
The Indian rupee faces headwinds from rising oil prices and a stronger dollar due to US rate hike expectations, though central bank intervention is expected to limit losses.
- Rising US interest rate expectations and Treasury yields.
- Brent crude oil prices reclaiming the $100 per barrel mark.
- RBI's intervention and outlook on the rupee's future.
MUMBAI: The Indian rupee is set to encounter headwinds on Thursday from a renewed rise in oil prices and a broadly firmer dollar on account of growing US rate hike expectations, while central bank intervention is expected to limit losses.
The Indian rupee is expected to open around 95.85-95.87 per dollar, traders said, down from its close at 95.74 in the previous session.
A stronger-than-expected US purchasing managers’ report overnight fanned new price concerns and a poorly received auction of five-year Treasury notes triggered a fresh jump in yields.
The 10-year US Treasury yield was up over 15 basis points from its closing level on Tuesday, while five-year yields rose above 5% for the first time since 2007.
Brent oil prices, meanwhile, reclaimed the $100 per barrel mark even as Iran said it remained open to diplomacy to end the US-Iran war, though the two countries remain far apart on ways to do so.
“The broader backdrop for Asia FX remains challenging,” analysts at MUFG said in a note.
“Currencies with limited exposure to the technology cycle and greater vulnerability to higher energy prices could come under renewed pressure.”
Foreign investors have net sold $3.5 billion of Indian stocks and bonds so far this month.
Fair case for inr appreciation
External pressures may have foreign investors looking past strength in India’s economy, a deputy governor at the Reserve Bank of India said in a speech on Wednesday.
“The Indian economy has done exceptionally well … (but) there does remain some disconnect between this real economy narrative and parts of the financial markets, attributable in good measure to the pull of short-term returns in competing markets,” said RBI Deputy Governor Poonam Gupta.
“The current market dynamics do not appear especially well-founded. If anything, there seems to be a fair case for the rupee to not just stabilize but perhaps even appreciate from the current levels,” Gupta said, noting that rupee weakness observed since March 2025 is a temporary phenomenon.
Over recent trading sessions, frequent interventions by the RBI have helped limit the local currency’s fall near the 96 handle, traders said.