Oil-driven dollar demand to pressure Indian rupee; RBI blunts losses

Mumbai: The Indian rupee is anticipated to face continued pressure throughout Wednesday's trading session, as Brent crude prices approach $90 per barrel and weaker Asian currencies cast negative sentiment, according to traders. The rupee is projected to open at 95.46-95.48 per dollar, having closed at 95.4350 on Tuesday, following a break above the 95 mark the previous week.

The local currency has been under pressure as oil prices surge due to uncertainty over the conclusion of the U.S.-Iran conflict. With Brent already up 7% this week and nearing $90, importers are increasingly utilizing hedging strategies, said bankers. This increased dollar demand is putting additional strain on the rupee and counteracting the positive impact from Reserve Bank of India interventions.

The central bank has been actively selling dollars through state-run banks to mitigate the rupee's declines, and traders believe the currency would have weakened further without this support. On Tuesday, the RBI sold dollars near the 95.40 level, and around 95.25-95.30 on Monday. A currency trader at a bank explained that the RBI is consistently offering dollars throughout the day, but the challenge lies in the fact that rising oil risk is driving underlying demand, which is now pushing the rupee lower. The trader predicts the RBI will resist a move above 95.50.