The rupee weakened against the US dollar on Monday, October 26, as higher crude oil prices, foreign investor withdrawals and uncertainty surrounding global markets continued to weigh on the domestic currency. The rupee slipped five paise to ₹94.98 against the dollar during early trade before falling further to close at ₹95.1850, down around 0.3% for the session, according to Reuters.
The decline extended the currency’s losing streak to three consecutive trading sessions, reflecting the pressure created by rising energy costs and reduced support from foreign investment inflows. The latest movement also highlights the vulnerability of emerging market currencies when international commodity prices rise and investors become more cautious about riskier assets.
The rupee opened at ₹94.92 in the interbank foreign exchange market before moving lower to ₹94.98. It had settled at ₹94.93 on Friday after losing 12 paise. Although the US dollar weakened against a basket of major currencies during early trading on Monday, the Indian currency struggled to recover as domestic demand for dollars remained firm.
Crude oil prices emerged as one of the biggest factors affecting the rupee. Brent crude, the global oil benchmark, traded near $115 per barrel after recording gains for three consecutive weeks. Prices rose by around 13% during that period amid concerns over supply disruptions following attacks by Yemen’s Houthi group on Saudi Arabia.
For India, higher oil prices create an immediate challenge because the country depends heavily on imported crude to meet its energy needs. When international prices rise, Indian refiners and importers require more dollars to purchase the same quantity of oil. This increases demand for the US currency and can weaken the rupee.
Expensive crude can also raise transportation, manufacturing and logistics costs. Businesses facing higher fuel and freight expenses may pass some of the additional costs on to consumers. If elevated oil prices continue, the impact could spread across the economy, complicating efforts to control inflation and maintain stable economic growth.
Foreign investment outflows have added to the pressure on the currency. Foreign investors have sold nearly $5 billion worth of Indian equities in October so far, following net sales of approximately $3.75 billion in September, Reuters reported. When overseas investors sell Indian shares and convert the proceeds into dollars, the resulting demand can put further pressure on the rupee.
The currency had received temporary support last week from inflows linked to the Jio Platforms initial public offering (IPO) and the unwinding of currency positions. However, traders expected that support to weaken as the IPO allotment process concluded on Monday, ahead of the company’s scheduled stock market listing on Wednesday.
With these inflows expected to fade, the rupee became more exposed to dollar demand from oil importers, businesses and investors. Market participants are also monitoring geopolitical developments, which could influence crude prices and determine whether foreign investors continue reducing their exposure to Indian assets.
Some international factors offered limited relief. The US dollar index, which measures the greenback against six major currencies, fell 0.15% to 101.49 during early trade. Lower US Treasury yields also provided some support to emerging market currencies. However, these developments were insufficient to offset the impact of expensive oil and capital outflows.
The Reserve Bank of India (RBI) remains an important influence on currency movements. The central bank can sell dollars from its foreign exchange reserves to help manage excessive volatility and smooth sharp fluctuations in the rupee. Traders said the absence of comparable support on Monday left the currency more exposed to market pressures.
India’s foreign exchange reserves have also come under scrutiny. RBI data showed that reserves declined by $5.011 billion to $721.016 billion in the week ended October 16, following a reduction of $8.578 billion in the preceding week. Reserve movements can reflect valuation changes and other factors, so the decline alone does not establish how much the central bank has spent defending the rupee.
Investors are now watching the US Federal Reserve’s monetary policy announcement scheduled for Wednesday. Markets largely expect the US central bank to leave interest rates unchanged, but its comments on the future direction of monetary policy could influence the dollar, bond yields and investment flows into emerging markets.
A sustained increase in oil prices could raise the import bill, add to inflationary pressures and affect business confidence.
The latest decline highlights the close relationship between India’s currency and international market conditions. Unless oil prices moderate or foreign investment inflows improve, the rupee may remain under pressure in the coming trading sessions. Investors will closely track global developments and central bank signals for clues about the currency’s next move.