Rupee Finds Support from Lower Oil, But Outflows Keep It Vulnerable
Falling crude oil prices gave the Indian currency some breathing room, helping it hold steady at lower levels. Yet forex analysts warn that steady withdrawal of foreign funds is limiting any meaningful recovery and keeping the rupee under pressure.
How lower crude helped
Crude is a major import for India, so cheaper oil eases the trade bill and reduces demand for dollars. That dynamic can provide short-term support for the rupee by lowering import-related outflows and improving the current account picture.
Why foreign fund withdrawals matter
Even with oil easing, sustained selling by foreign portfolio investors (FPIs) offsets the benefit. When foreign funds exit local equity and debt markets, they sell rupee assets and convert proceeds into dollars, increasing demand for the greenback and weighing on the rupee.
What markets are watching next
- Oil prices — further declines could help the currency; a rebound would add pressure.
- FPI flows — inflows could stabilise or strengthen the rupee; continued outflows will keep it pressured.
- Global cues — dollar strength, US interest-rate signals and geopolitical risks shape risk appetite.
- Domestic data and policy — inflation, growth indicators and central bank moves may influence sentiment.
In short, lower crude provides a helpful tailwind, but the path for the rupee will depend heavily on whether foreign investors pause their withdrawals and on broader global market trends.