Why RBI is Holding the Rupee at 95.45 as Oil Climbs

The Indian rupee is caught between two opposing forces: rising crude oil prices that push it lower, and a Reserve Bank of India that has been defending the currency around ₹95.45 per US dollar. The rupee opened at ₹95.36 and hovered near ₹95.45 during the session, according to market data cited by brokerage Swastika.

The backdrop is a familiar one for India's currency. Brent crude traded around US$86.70 per barrel, while the dollar index sat near 99.95. Because India imports more than 80% of its crude oil requirement, higher oil prices raise the country's import bill and increase demand for US dollars from oil marketing companies, which in turn puts downward pressure on the rupee.

Contents

01

How oil prices weigh on the rupee

02

The defence at 95.45

03

Why the band is holding

04

What could change the picture

How oil prices weigh on the rupee

India's heavy reliance on imported crude gives oil prices a direct line to the rupee's value. When oil becomes more expensive, importers need more dollars to settle their bills, widening the current account deficit and adding to selling pressure on the domestic currency.

Traders said intervention and liquidity measures by the Reserve Bank of India have helped prevent sharper losses in the rupee despite these headwinds, according to a report citing market participants. The central bank's presence around the ₹95.45 level has been a key anchor for the currency.

The defence at 95.45

The RBI has been defending the rupee around ₹95.45 per US dollar. The rupee's previous close stood at ₹95.44, and in the latest session it opened at ₹95.36 before hovering near ₹95.45 as oil softened.

Exporters have also been active on the currency desk, selling dollars around the ₹95.45 level. That selling has helped cap downside risk and keep the rupee in a relatively narrow trading band, according to Swastika's analysis.

Why the band is holding

The combination of RBI support and exporter dollar sales has kept the rupee from breaking sharply lower. With Brent near US$86.70 per barrel and the dollar index close to 99.95, the market has shown a preference for a stable band rather than a sharp move in either direction.

The rupee's daily path remains a function of two dominant forces: crude oil prices and the strength of the US dollar. When oil prices rise, demand for dollars increases and pushes the exchange rate higher; when oil prices fall, the opposite tends to occur, particularly if the dollar index does not strengthen at the same time.

What could change the picture

The trajectory of crude oil prices remains one of the most important drivers for the rupee. A sustained increase in oil prices can raise India's import bill and increase demand for dollars, while easing oil prices tend to relieve pressure on the currency, especially when the dollar index is also easing.

For now, the defence around ₹95.45 has held. But the rupee's stability depends on whether oil prices keep climbing and whether the dollar index strengthens further, both of which would test the central bank's willingness to keep supporting the currency at current levels.