The rupee had closed at 95.2075 per dollar on Friday (August 7), gaining around 0.2% over the week, according to Reuters.
Why oil prices matter for the rupee
Crude oil prices are likely to remain a key driver of the rupee this week amid uncertainty in the West Asia. India imports most of its crude oil requirements, so a sustained rise in global oil prices can increase the country’s import bill and demand for dollars, putting pressure on the rupee.
Developments around the Strait of Hormuz are therefore being closely watched. Iran said on Sunday (August 9) that a deal on new shipping lanes through the strategic waterway was nearly finalised, but added that the route would reopen only after the US meets other conditions.
Any disruption to oil supplies or a sharp rise in crude prices could add to inflationary pressures and weigh on the rupee.
Inflation data in focus
Markets are also awaiting India’s July retail inflation data due on Wednesday. A Reuters poll of 40 economists expects consumer price inflation to rise to 4.50% in July from 4.38% in June.
The US will also release its July consumer inflation data on Wednesday. Traders are watching the numbers for clues on the Federal Reserve’s interest-rate path.
The US dollar and Treasury yields came under pressure after data on Friday (August 7) showed the US economy unexpectedly lost jobs in July. The weaker labour-market reading led traders to scale back bets on higher US interest rates.
RBI policy outlook
The Reserve Bank of India kept its policy rates unchanged last week. However, some analysts expect inflation pressures to build later in the year.
ANZ expects the RBI to deliver at least two 25-basis-point rate hikes from December 2026, citing rising inflation expectations, elevated global commodity prices and resilient domestic demand.
The RBI has projected headline inflation at 5% for the current fiscal year, while lowering its core inflation forecast by 40 basis points to 4.3%.
For the rupee, the combination of crude prices, global yields, the dollar’s movement and domestic inflation will be important in determining the near-term trajectory.
What to watch this week
Apart from India’s July CPI data on Wednesday (August 12), traders will track July wholesale inflation data on Friday (August 14). In the US, July CPI and core inflation data are also due on Wednesday (August 12), followed by retail sales and other economic indicators later in the week.
The rupee’s opening move on Monday (August 10) is modest, with the currency 4 paise stronger than Friday’s (August 7’s) close, but the broader direction is likely to depend on how oil prices and inflation expectations evolve.
