The Indian rupee opened higher on Monday, October 19, at 94.88 against the US dollar, compared with Friday’s (October 16’s) close of 94.96, strengthening by 8 paise.
The currency has been hovering around the 95-per-dollar mark in recent sessions, with Reserve Bank of India (RBI) intervention expected to help limit further weakness. Market participants believe the central bank may be selling dollars to support the rupee when it comes under pressure near this level, although the RBI has not officially confirmed a specific defence level.
The rupee recorded its strongest weekly performance in nearly four years last week, supported by the RBI’s measures to stabilise the currency and its dollar sales in the spot market.
However, the currency continues to face pressure from elevated crude oil prices and foreign capital outflows. The RBI has stepped up its efforts to support the rupee, including through foreign exchange market intervention and sell-buy swaps.
India’s foreign exchange reserves declined by nearly $60 billion from their record high in the first week of September to $726 billion as of October 9. The decline comes amid the central bank’s efforts to manage currency volatility, though changes in reserves can also reflect valuation effects and other factors.
Why crude oil prices matter for the rupee
Crude oil remains a key factor influencing the rupee because India imports a large share of its oil requirements. When global oil prices rise, the country’s import bill can increase, raising demand for dollars and putting pressure on the domestic currency.
Brent crude briefly crossed $110 a barrel on Friday (October 16), reaching its highest level since May, before easing on Monday (October 19). It was trading around $108 a barrel amid developments concerning US sanctions on Russia and the potential for higher Russian fuel exports.
Sustained high oil prices could make it more difficult for the rupee to strengthen, even if the RBI continues to intervene in the foreign exchange market.
Can the rupee sustain its recovery?
The RBI’s intervention has helped the rupee recover from recent weakness, but the sustainability of that recovery will depend partly on global conditions. Lower crude oil prices could ease pressure on India’s import bill, while continued foreign capital outflows and dollar demand could weigh on the currency.
The 95-per-dollar level has emerged as an important near-term reference point for traders. However, it should not be treated as an officially announced RBI target or a guaranteed floor for the rupee.
For individuals, currency movements can affect the cost of overseas travel, foreign education fees and international transactions. A weaker rupee generally makes these expenses costlier in Indian currency, while a stronger rupee can offer some relief.
-With Reuters inputs
