The rupee opened 4 paise higher at ₹95.40 against the US dollar on Wednesday, 12 August, but sentiment remained cautious as Brent crude approached $90 a barrel and Asian currencies weakened. The Reserve Bank of India (RBI) is expected to continue intervening in the foreign exchange market to limit the currency’s downside.
The rupee has remained under pressure since slipping past the ₹95 mark last Wednesday, with rising oil prices and uncertainty over the resolution of the US-Iran conflict weighing on the currency.
Brent crude has gained around 7% this week and is nearing $90 a barrel, prompting importers to increase hedging activity, bankers told Reuters. The resulting demand for dollars is adding pressure on the rupee and offsetting the support from RBI interventions.
The RBI has sold dollars through state-run banks in both trading sessions so far this week to contain the rupee’s losses. Traders said the currency could have weakened further in the absence of the central bank’s intervention.
Dollar awaits US inflation cue
The dollar remained firm near 99.80 on the Dollar Index, recovering from a two-month low as uncertainty around oil prices supported the greenback. The US 10-year Treasury yield also stayed elevated at around 4.7%, reflecting concerns that higher crude prices could keep inflationary pressures sticky.
Market attention is now on the US consumer price index (CPI) data. A hotter-than-expected inflation reading could strengthen expectations of a September Federal Reserve rate hike, pushing Treasury yields and the dollar higher and potentially adding pressure on the rupee. Conversely, a softer CPI print could ease rate-hike expectations and provide some relief to the Indian currency.
FPI inflows offer limited relief
Foreign portfolio investors (FPIs) have turned buyers of Indian assets in August, with equity inflows reaching around $1.8 billion so far, while debt investments stood at about $0.2 billion. However, analysts cautioned that the recent inflows need to be viewed in the broader context.
FPI outflows for 2026 remain at around $16.5 billion, already exceeding the total outflow recorded in 2025. The recent buying therefore provides some near-term support to Indian equities and the rupee, but may not yet signal a sustained reversal in foreign investor sentiment.
Rupee Outlook
Amit Pabari, MD, Research Team, CR Forex Advisors, said that the 95.00–95.10 zone remains a key support for USD/INR. With the rupee breaking above 95.30 on Tuesday, the pair is now more likely to move towards 95.80 and subsequently 96.20. Tonight’s US CPI could be the next trigger, with a hot print supporting a move towards 95.80–96.20.
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