Mumbai, Sep 7: The Indian rupee remained largely steady against the US dollar in early trade on Monday, supported by strong foreign-currency inflows even as rising crude oil prices and geopolitical tensions continued to put pressure on the currency.
The rupee opened at 94.40 per dollar and moved up to 94.39, gaining 4 paise from its previous close. The currency has been finding support from strong dollar inflows linked to the recent FCNR(B) mobilisation and measures taken to strengthen foreign-exchange liquidity.
The positive impact of these inflows is being partly offset by higher crude prices. Brent crude climbed to around $97 a barrel, as continuing tensions involving the US and Iran raised concerns about possible disruptions to energy supplies through the Strait of Hormuz.
For India, expensive crude remains a key concern because the country relies heavily on imports to meet its energy requirements. A prolonged rise in oil prices can increase the import bill and put pressure on the rupee by raising demand for dollars.
At the same time, strong foreign-currency inflows have provided the market with an important cushion. India attracted more than $136 billion in foreign-currency inflows through special measures, including FCNR(B) deposits, external commercial borrowings and overseas foreign-currency borrowings. These inflows have also helped strengthen the country’s foreign-exchange reserves.
The Reserve Bank of India has also remained active in the foreign-exchange market to prevent sharp movements in the rupee. Recent intervention by the central bank has helped limit the impact of higher oil prices and broader global market volatility.
The rupee’s near-term movement is therefore likely to depend on the balance between strong dollar availability and external pressures such as crude oil prices, geopolitical developments and expectations around US interest rates.
For businesses and consumers, a relatively stable rupee can help contain the impact of imported costs. However, if crude prices remain elevated for a longer period, the pressure on India’s import bill, inflation and currency could increase.
For now, strong foreign-currency liquidity and RBI support are helping the rupee stay relatively stable, but the sharp rise in global oil prices remains a major risk for the currency in the days ahead.