The Indian rupee opened 37 paise lower at 95.70 against the US dollar on Monday, 13 July, as renewed escalation in the US-Iran conflict triggered a sharp rise in crude oil prices, raising concerns over India’s import bill and trade balance.
Investor focus shifted back to the energy market after Iran expanded its strikes on Gulf states in response to recent US attacks, while US President Donald Trump said the ceasefire was over, reigniting geopolitical tensions in the Middle East.
The rupee traded in a 94.96–95.60 range last week, largely tracking crude oil price movements, reflecting India’s heavy dependence on oil imports. Market participants expect the currency to remain sensitive to crude price fluctuations this week as investors assess the impact of the latest military escalation on global energy supplies.
Rupee remains more sensitive to rising oil prices
According to market experts, the rupee has historically reacted more sharply to rising crude oil prices than it has benefited from subsequent declines. Before the recent Middle East conflict, when Brent crude was trading near $73 per barrel, the rupee was around 91 against the US dollar. As crude surged to nearly $120 per barrel, the domestic currency weakened to 96.80. Even after oil prices retreated to around $76 per barrel last week, the rupee recovered only modestly to the 95 level. Experts believe the latest rebound in crude prices to around $78 per barrel reinforces this trend, highlighting the currency’s vulnerability to higher energy costs.
Stronger dollar adds to pressure on the rupee
Experts noted that the US Dollar Index has climbed back above the 101 mark as investors sought safe-haven assets amid escalating geopolitical tensions in the Gulf. They said rising crude oil prices could add to global inflationary pressures, reducing the likelihood of near-term interest rate cuts by the US Federal Reserve. A firmer dollar, coupled with elevated oil prices, is expected to keep pressure on emerging market currencies, including the rupee.
RBI continues to rebuild foreign exchange reserves
According to market experts, the Reserve Bank of India (RBI) appears to be rebuilding its foreign exchange reserves rather than aggressively defending the rupee. India’s forex reserves increased by $7.26 billion to $674.19 billion last week, supported in part by robust debt inflows of around $5.8 billion in June following measures aimed at improving foreign investor access to the domestic debt market. Experts believe the stronger reserve position provides the RBI with a buffer against external volatility, although sustained pressure from higher oil prices could continue to weigh on the currency.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, said that in the current situation, most of the factors at play, rising crude oil prices, a firmer DXY, and the RBI refilling its reserves, all point towards the rupee remaining under pressure.
“On the technical charts, the 95.80 to 96.00 zone is a strong resistance area, and this level is expected to break soon. Once it does, the next 50 to 80 paisa move is likely to happen fast. Overall, the rupee is expected to head towards the 96.30 to 96.50 levels over the coming days,” said Pabari.
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