FX.co ★ Rupee Remains Under Pressure

The Indian rupee hovered near 96.2 per dollar, staying under pressure after touching eight-week lows as sentiment deteriorated on the back of rising crude oil prices. Brent crude climbed above $85 per barrel amid escalating tensions between the US and Iran, stoking worries over potential supply disruptions through the Strait of Hormuz and a consequent increase in India’s oil import bill. The rupee has depreciated about 1.7% so far this month, edging closer to its record low hit in May. At the same time, the earlier optimism stemming from the Reserve Bank of India’s recent steps to attract dollar inflows has largely dissipated, leading traders to resume buying dollars on dips in anticipation of further rupee weakness. Adding to the downward pressure, Indian companies announced more than $14 billion in overseas investments early in the fiscal year, lifting demand for foreign currency. Foreign portfolio outflows and higher oil imports have further weighed on the rupee and eroded India’s foreign exchange reserves.