The Indian rupee remained under pressure despite a set of factors that would normally help the currency. Forex analysts said a weaker US dollar, softer crude oil prices and some inflows of foreign capital into domestic equities were not enough to steady the rupee.
Why the expected support didn’t materialise
Several market dynamics can blunt the positive impact of a weak dollar and lower oil costs. Analysts pointed to a mix of demand- and sentiment-driven forces that outweighed those supports:
- Strong dollar demand locally: Importers, corporates and borrowers may still need dollars for settlement, keeping pressure on the rupee.
- Sentiment and risk aversion: Global uncertainty or sudden portfolio shifts can prompt capital to seek safe-haven assets, reducing sustained gains from short-term inflows.
- Timing and scale of inflows: Small or sporadic foreign buying in stocks may not be large enough to offset broader currency outflows or market stress.
- Other domestic pressures: Factors such as trade deficits, debt repayments and policy expectations can counteract the benefits of lower crude prices.
Market implications
A rupee that does not respond to typical supports keeps import costs and inflation risks in focus for businesses and policymakers. For exporters, a softer currency can be beneficial, but for import-reliant industries and consumers, the effect can be mixed.
What to watch next
Traders and corporates will be watching flows into equity and debt markets, oil price movements and any central bank signals. A sustained change in any of these areas could quickly alter the currency’s path.
In the near term, analysts say the rupee’s direction will depend on the balance between persistent dollar demand and the scale of incoming foreign capital — not just headline moves in the dollar or oil prices.