The rupee opened at ₹94.51 per US dollar, compared with Monday’s (September 7’s) close of ₹94.49. The local currency has recovered from levels around ₹95.70 in recent sessions, but its move towards stronger levels has lost momentum, bankers said.
The currency remains caught between competing forces. Dollar inflows and intervention by the Reserve Bank of India (RBI) have supported the rupee, while higher oil prices and renewed demand for dollars from importers have limited further gains.
Why is the rupee struggling to strengthen further?
One key factor is crude oil. India imports most of its crude oil requirement, making the rupee particularly sensitive to movements in global oil prices. When crude becomes more expensive, Indian importers need more dollars to pay for the same quantity of oil, increasing demand for the US currency.
Brent crude was trading near $97 a barrel on Tuesday (September 8). Oil prices have risen sharply amid escalating tensions between the US and Iran and concerns over potential disruptions to energy infrastructure and shipping through the Strait of Hormuz.
Brent had gained nearly 8% last week, adding to pressure on oil-importing economies such as India.
Goldman Sachs has also raised its Brent price forecasts by $5 a barrel to $85 for December 2026 and $80 for 2027, assuming disruptions to West Asia shipping persist. The investment bank said the risks remain skewed to the upside in the near term, with Brent potentially reaching $120 a barrel in an upside scenario.
Importers step up dollar hedging
Another factor is increased dollar demand from Indian companies.
The recent recovery in the rupee has given importers an opportunity to lock in their future dollar requirements at relatively favourable levels. This hedging demand can prevent the rupee from strengthening rapidly even when broader dollar conditions are supportive.
Bankers said the RBI has also remained active in the foreign exchange market. However, its role in recent sessions appears to have shifted from actively driving the rupee higher through dollar sales to absorbing pressure arising from higher oil prices and elevated US Treasury yields.
A currency trader at a bank said the RBI has been active around the ₹94.50 level.
What happened to the rupee on Monday?
The rupee ended Monday (September 7) at ₹94.49 per US dollar. It had opened at ₹94.40 and moved between an intraday high of ₹94.38 and a low of ₹94.50.
Foreign inflows provided some support to the currency, but a weak domestic equity market and rising crude prices weighed on sentiment.
The dollar index, which measures the US currency against a basket of six major currencies, was trading at 98.90, down 0.27%.
What could determine the rupee’s next move?
For the rupee, the immediate direction will depend on a combination of crude prices, foreign capital flows, the dollar’s global movement and RBI intervention.
A sustained rise in crude could increase India’s dollar demand and put fresh pressure on the rupee. On the other hand, a softer dollar, stronger foreign inflows or an easing of West Asia tensions could provide some relief.
The rupee had earlier benefited from strong foreign currency inflows, including inflows into FCNR(B) deposits. India’s foreign exchange reserves also rose by $11.475 billion to a record $740.803 billion in the week ended August 28, according to RBI data.
For now, the ₹94.50 level has emerged as an important zone to watch, with oil prices and importer hedging making it harder for the rupee to extend its recent recovery.
-With agencies inputs
