Rupee sees worst day in eight weeks as elevated crude renews pressure

The rupee depreciated on Tuesday as rising crude oil prices and persistent risk-off sentiment weighed on the local currency, dealers said. It settled at 94.83 per dollar, against the previous close of 94.49 per dollar, marking its sharpest single-day decline since July 14.

 

The rupee, which had remained largely unchanged in the previous two trading sessions, came under pressure as Brent crude moved closer to $100 a barrel amid heightened geopolitical tensions, while continued importer hedging and limited foreign inflows added to dollar demand.

 

“After remaining unchanged for two consecutive sessions, the Indian rupee fell sharply amid persistent risk-off sentiment and higher oil prices, as aggressive dollar buying outstripped liquidity,” said Dilip Parmar, Senior Research Analyst, HDFC Securities. “The ongoing geopolitical worries and a lack of supportive FII inflows amplified the decline, while market participants keep a cautious eye on upcoming domestic inflation data and major central bank policy decision,” he added. The next Federal Reserve FOMC meeting is scheduled for September 15–16, 2026.

 

 

The rupee, which has appreciated by 0.37 per cent in the current month so far, has fallen 4.06 per cent since the start of the Iran war.

 

“The rupee opened weaker and remained under pressure through the session as oil prices rose for a third consecutive day on concerns over disruptions to energy supplies amid the ongoing Iran war,” said a dealer at a state-owned bank.

 

Tensions in West Asia escalated after attacks by Yemen's Iran-aligned Houthis on energy facilities in Saudi Arabia, while Tehran threatened the US with what it called “economic warfare”.

 

“The RBI's dollar sales had supported the rupee's recovery in recent weeks, but market participants expect the central bank to remain cautious as higher crude prices could put renewed pressure on the currency,” said a dealer at a private bank.

 

Market participants also said hedging demand from local importers remained elevated, limiting the rupee's ability to extend its recent gains. The currency had risen to a more than two-month high last week following sustained intervention by the Reserve Bank of India via dollar sales, but the rally has since faced resistance as oil prices resumed their upward move.

 

In the bond market, the 10-year government bond yield was largely unchanged at 6.97 per cent on Tuesday, while the five-year yield rose 2 basis points to 6.52 per cent.

 

Market participants said that oil prices and expectations around US monetary policy are likely to remain key drivers for the rupee in the near term. Markets are also watching the US consumer price inflation data due on Friday, which could influence expectations around the Federal Reserve's policy decision next week.

 

“After remaining unchanged for two consecutive sessions, the Indian rupee fell sharply amid persistent risk-off sentiment and higher oil prices, as aggressive dollar buying outstripped liquidity. The ongoing geopolitical worries and a lack of supportive FII inflows amplified the decline, while market participants keep a cautious eye on upcoming domestic inflation data and major central bank policy decision. In the near term, spot rupee is expected to trade within a range, facing overhead resistance at 95.10 and support at 94.45,” said Dilip Parmar, Senior Research Analyst, HDFC Securities.

 

In recent months, the RBI and government have introduced a series of measures to attract foreign capital, including subsidising the hedging cost on fresh FCNR(B) deposits, exempting such deposits from CRR and SLR, and offering concessional dollar-rupee swaps for FCNR(B) deposits and eligible ECBs.

 

The government has also exempted foreign investors from income tax on interest income and capital gains from government securities, while the RBI has widened access to longer-tenor government bonds under the Fully Accessible Route (FAR).