The Indian rupee could come under further strain and potentially approach the psychologically important 100 per US dollar level if elevated global oil prices persist and continue to pressure the country’s external finances, according to a Bloomberg report.
The currency has already weakened by more than 7% this year and briefly touched the 97 level this week before intervention by the Reserve Bank of India helped curb further losses.
The outlook has been weighed down by rising oil prices linked to geopolitical tensions involving the United States and Iran. As one of the world’s largest crude importers, India is highly exposed to higher energy costs, which can widen its trade deficit.
Fund managers have warned that another spike in oil prices could accelerate depreciation in the rupee.
Despite the weakness in the currency, foreign investors have continued modest inflows into Indian debt markets. Data from the Clearing Corporation of India shows foreign holdings of index-eligible bonds rose by about INR 20 billion in May, following inflows of around INR 50 billion in April. However, these gains remain below January’s roughly INR 130 billion and come after an outflow of nearly INR 190 billion in March.
Several global banks have revised their forecasts lower. DBS Bank expects the rupee to trade in the 95–100 range per dollar, while Citigroup sees it potentially moving toward 98 in the near term.
Market participants are also watching closely for any stronger intervention from the Reserve Bank of India if the currency moves closer to the 100 level.
