Indian rupee slips as costlier oil weighs, RBI intervention caps losses

what happened

Reuters reports that the Indian rupee came under pressure on Wednesday as oil prices pushed higher. At 11 a.m. IST the currency stood at 95.19 per dollar, compared with a close of 95.1150 in the previous session. Oil rose more than 1% after an attack on a refinery in Saudi Arabia revived supply concerns, and Brent traded near $115.5 per barrel, close to its highest level since April. India imports nearly 90% of its crude needs.

Modest foreign portfolio inflows and, according to traders, likely intervention by the Reserve Bank of India helped contain the fall. State-run banks were seen offering dollars. Other Asian currencies lost between 0.1% and 1% that day, with the Korean won leading declines. Indian shares underperformed the region, with the Nifty 50 down 0.7%.

Investors are also waiting for the Federal Reserve's decision later in the day, which most market participants and economists expect to leave rates unchanged. MUFG said in a note that a hawkish tone would reinforce expectations of rate hikes and weigh on Asian currencies.

why it matters

For the rupee, the main driver right now is the price of oil, since India relies heavily on imports. Frequent RBI interventions limit the decline but do not remove the pressure. The Fed's guidance could also affect US yields and Asian currencies.

market impact

Indian rupee and Asian FX: costlier oil pressures the currency, RBI intervention limits the decline

• ▼Indian rupee pressure down — costlier oil increases demand for dollars to pay for imports
• ▲Brent pressure up — an attack on a Saudi refinery raises concerns about supply

tags

instruments