The Indian rupee closed at 95.55 against the US dollar on Friday, down 11 paise from the previous session, marking its fifth consecutive weekly decline and recording the steepest weekly fall since May 15. As per The Economic Times, the rupee faced mounting pressure from external factors during the week, giving up much of the rally that had taken it to a two-month high-near 94.30 per dollar-earlier this month. The currency has now lost around 1% over the past three sessions as crude oil prices surge dramatically, though benchmark crude oil prices climbed to $105 per barrel amid fresh tensions in the Strait of Hormuz. The rupee opened at 95.70 against the US dollar and fell further to a low of 95.80 before hitting the day's high of 95.51 before closing down by 11 paise at 95.55 (provisional). The rupee's decline comes amid foreign portfolio outflows and escalating Middle East tensions, with the currency struggling at a fresh low driven by elevated crude oil prices and foreign portfolio outflows. This week saw the Indian rupee tumble more than one percent against the dollar, primarily influenced by surging oil prices, with central bank interventions playing a critical role in curtailing further depreciation.
RBI Governor Sanjay Malhotra signaled the central bank's continued commitment to forex market support in a media interview aired on Friday. As per The Economic Times, Malhotra said the central bank would need to support the forex markets, referring to how the central bank's potential dollar sales would aid the drainage of excess INR liquidity from the banking system. The RBI is 'not taking any tools off the table' to manage liquidity and keep the overnight rate aligned with the key repo rate, Malhotra stated, pointing to open market bond sales and FX swaps among the options. Traders said the central bank had likely conducted dollar-rupee sell/buy swaps on Friday for the third consecutive session, as a measure to drain excess cash from the banking system. The banking system had surplus liquidity of ₹10.5 lakh crore as of Tuesday, according to The Economic Times, with net liquidity in the banking system at a surplus of ₹10.48 trillion on Tuesday. There was a lot of dollar demand from oil companies, while state-run banks were spotted selling dollars at 95.80 levels, said Anil Bhansali, head of treasury at Finrex, as reported by The Economic Times.
Oil prices were set to end the week above $100 a barrel for the first time since mid-May, though they edged lower on Friday after the Financial Times reported that Middle East foreign ministers were seeking a temporary deal on shipping through the Strait of Hormuz. As reported by The Economic Times, Brent crude, the global oil benchmark, climbed past $110 per barrel amid escalating U.S.-Iran tensions and fresh attacks on American assets. The US military destroyed five Iranian oil tankers on Tuesday in response to the latest attacks on its warships, and Iran hit back at American targets in Jordan. Brent crude was trading lower by 3.28% at $104.10 per barrel in futures trade, providing some relief from earlier highs. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.13, higher by 0.09%, adding to the pressure on emerging-market currencies. *Goldman Sachs has raised its Brent price forecasts by $5 per barrel to $85 for December 2026 and $80 for 2027, assuming disruptions to West Asia shipping persist.
The rupee's decline comes amid persistent geopolitical tensions and sluggish monsoon rainfall that continued to weigh heavily on domestic sentiment, dampening the positive momentum generated by RBI and government support measures, as noted by HDFC Securities Senior Research Analyst Dilip Parmar. Forex traders said risk aversion in global markets and elevated crude oil prices are weighing on the rupee, which closed lower for the fifth consecutive session on Friday. Indian shares ended Friday's session lower as Middle East tensions persisted, and investors awaited key U.S. CPI data later in the day for additional clues on the Federal Reserve's rate trajectory. However, after crashing nearly 1 percent earlier in the session, benchmark indexes Sensex and Nifty sharply recovered most of their losses to end the day only with modest cuts. NIFTY 50 closed at 23,398.10, down by 79.70 points while BSE SENSEX finished at 74,781.76, dropping 120.83 points, according to Business Standard. Foreign Institutional Investors (FIIs) offloaded equities worth ₹582 crore on a net basis on Wednesday, according to exchange data. For the rupee, the pressure continues. It remains in an uptrend beyond 95 on the back of costly oil and foreign portfolio outflows, and we could see 96, with 95 now acting as support, said Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities, as reported by The Economic Times.
Given the steep rise in spot USD/INR over the past three sessions, upside momentum may moderate near the 95.80 resistance level, while 95.15 should provide near-term support, said Dilip Parmar, Senior Research Analyst with HDFC Securities, as reported by CNBC TV18. In the near term, spot USDINR faces resistance at 95.80, with strong support positioned around 95.15, paving the way for a phase of consolidation following the recent sharp upward surge. We expect the rupee to trade with a negative bias on risk-off sentiments in global markets and inflation concerns over elevated crude oil prices. However, any intervention by the RBI may support the rupee at lower levels, said Anuj Choudhary, Research Analyst with Mirae Asset Sharekhan. USD/INR spot price is expected to trade in a range of 95.45 to 95.90. Investors will track US and Indian inflation data for further cues. The weaker rupee is also making imported commodities more expensive and adding to inflationary pressures if the currency remains under pressure for an extended period. Higher crude prices are negative for the rupee because India pays for a large part of its oil imports in US dollars. When oil prices rise, importers need more dollars to make the same purchases, increasing demand for the US currency. For an economy that imports nearly 90 per cent of its crude, every $10 rise in oil can add roughly $12-15 billion to the annual import bill, putting further pressure on the current account and the rupee, as noted by CR Forex Advisors MD Amit Pabari.
