The Indian Rupee (INR) continues to face downward pressure against the US Dollar (USD), even as the broader USD weakens, according to OCBC strategists Sim Moh Siong and Christopher Wong [1]. Elevated oil prices and sustained importer demand for dollars are cited as the main factors weighing on the INR, given India's significant dependence on oil imports [1]. The Reserve Bank of India (RBI) has intervened with USD sales, which has helped contain losses and prevented the USD/INR pair from rising further [1].
Despite a recent overnight sell-off in the USD and lower US Treasury yields, the INR has not fully benefited from the weaker USD environment, highlighting a divergence from other Asian currencies [1]. The strategists note that unless crude oil prices decline more significantly, the INR is likely to continue lagging behind its regional peers [1].
A notable development is the early closure of the RBI’s concessional FCNR(B) swap window at the end of August, which removes a source of incremental FX inflows earlier than anticipated [1]. However, the strategists mention that the sizeable inflows received so far and a potential last-minute rush before the August 31 deadline may still provide some buffer for the INR [1].
From a technical perspective, USD/INR last closed at 95.76, with daily momentum indicators turning mildly bullish and the Relative Strength Index (RSI) rising [1]. The risks for the currency pair are skewed to the upside, with resistance levels at 95.90 and 96, and support at 95.40 (50-day moving average) and 95.10 [1].
CONCLUSION
The Indian Rupee remains under pressure due to elevated oil prices and strong importer demand for dollars, despite a weaker US Dollar. RBI interventions and recent FX inflows offer some support, but risks for USD/INR remain tilted to the upside. Unless oil prices ease, the INR is expected to continue lagging its Asian peers.