The Indian rupee ended almost flat on Thursday, gaining 3 paise to settle at Rs 95.70 per USD, as support from a weaker US dollar was offset by raised crude oil prices. The currency had opened at Rs 95.57 and moved in a narrow range of Rs 95.56-95.72 during the session. The rupee had closed at Rs 95.73 per USD on Wednesday, gaining just 1 paisa. The latest movement came amid mixed global and domestic factors, with the dollar weakening but crude oil prices remaining above USD 90 a barrel.
Dollar Weakness Supports Rupee
The US dollar index fell to its lowest level since late May, after the US Treasury announced that it would double its buyback operations for longer-dated Treasury bonds. This specific fiscal maneuver pushed US long-term yields lower, which in turn reduced the dollar’s yield advantage over other currencies. This structural change provided some support to emerging-market currencies, including the rupee, as investors adjusted their portfolios accordingly. The dollar index was trading at 98.61, down 0.22 per cent, during the session.
However, the benefit from the weaker dollar was limited by raised crude oil prices. Forex traders noted that crude oil prices remaining above USD 90 per barrel could continue to pressure India’s import bill. Since India is heavily dependent on crude imports, this sensitivity to movements in global oil prices weighs directly on the currency’s value. The cost of importing energy acts as a significant drag on the rupee’s performance despite external currency strength.
Crude Prices Remain Key Risk
The rupee’s narrow movement comes as global markets assess the impact of higher energy prices and geopolitical tensions. Brent crude has remained raised amid continuing uncertainty in the Middle East, adding pressure to India’s external balance. These external sector vulnerabilities act as a persistent constraint, limiting the upside potential of the rupee even when other factors are favorable.
The Reserve Bank of India has also remained active in the foreign exchange market to limit excessive volatility in the rupee. Reuters reported that the central bank was likely intervening in the market as the currency faced pressure from corporate hedging activity and maturing derivative contracts. This defensive posture suggests the central bank is prepared to absorb sell orders to stabilize the local unit.
Traders are watching closely to see if the central bank will sustain this level of support or step back as the month progresses. Even with the dollar weakness, the combination of high oil costs and potential outflows could test the limits of the central bank’s defense, making the near-term path uncertain. The rupee’s near-term trajectory is therefore likely to remain dependent on crude prices, dollar movements, foreign fund flows and RBI intervention. Factors That May Impact Trump Stock Rally could also influence global sentiment, adding another layer of complexity to the currency’s performance.