The rupee opened at 96.15 per dollar, compared with Friday’s (July 24’s) close of 96.56 per dollar, marking a gain of 41 paise. The currency had been under pressure in recent sessions and was close to breaching the 97 per dollar mark before support from the Reserve Bank of India (RBI) helped limit losses.
Lower crude prices provide support
The immediate relief for the rupee came from a decline in crude oil prices after US President Donald Trump paused strikes on Iran following two weeks of attacks, raising hopes of a possible diplomatic solution.
Brent crude futures for September delivery fell around 4% to $93.02 per barrel after touching a high of nearly $102 per barrel last week amid concerns over supply disruptions.
Lower crude prices are positive for the rupee as India meets a large part of its crude oil demand through imports. A rise in global oil prices typically increases India’s import bill, puts pressure on the current account deficit and raises demand for dollars.
“The pullback in oil prices is a major relief for the Indian currency, given India’s dependence on crude imports,” market participants said.
RBI measures boost dollar inflows
Apart from oil prices, expectations of stronger foreign currency inflows are also supporting the rupee.
The RBI’s recent measures to attract foreign currency deposits and improve dollar liquidity have reportedly drawn significant inflows. RBI Governor Sanjay Malhotra said that the dollar mobilisation measures announced in June have attracted nearly $32 billion, according to an interview published by The Hindu BusinessLine.
Earlier updates had indicated that the measures had brought in around $20 billion by July 17.
Higher dollar inflows provide additional support to the rupee by improving foreign exchange availability and giving the central bank more room to manage volatility in the currency market.
Rupee outlook remains linked to global cues
Despite Monday’s (July 27’s) recovery, the rupee remains vulnerable to global developments, particularly movements in crude oil prices, geopolitical tensions and the strength of the US dollar.
On Friday (July 24), the rupee came close to falling below the 97 per dollar level before recovering with support from RBI intervention. A sustained decline in oil prices and continued foreign currency inflows could provide further stability, while any fresh escalation in geopolitical tensions may put pressure on the currency again.
-With Reuters inputs
