The Indian rupee opened 3 paise lower at 95.36 against the US dollar on Thursday, 13 August, as persistent dollar demand from hedgers continued to weigh on the currency. However, continued intervention by the Reserve Bank of India (RBI) helped limit the downside.
The rupee remained largely range-bound on Wednesday, moving within a narrow 3–4 paise band for most of the session. Steady dollar selling by state-run banks, likely on behalf of the RBI, supported the currency, which staged a late recovery after further central bank intervention and eventually ended around 0.1% higher.
The domestic currency has traded within a range of less than 30 paise so far this week, while near-term realised volatility has also declined sharply.
According to a currency trader quoted in a Reuters report, the RBI’s “nearly all-day presence” in the market has increasingly muted the impact of movements in crude oil prices and the broader US dollar, suggesting that the central bank’s intervention is helping stabilise the rupee.
Strait of Hormuz uncertainty keeps pressure on Rupee
The initial optimism over a possible extension of the ceasefire proved short-lived, with Iran later clarifying that no discussions had taken place on extending the truce. Tehran reiterated that Washington would first need to return to the agreement and establish a timeline for fulfilling its commitments. Adding to the uncertainty, US President Donald Trump said Washington had “total control” over the Strait of Hormuz, a claim that Iran rejected.
Experts said the unresolved situation around the Strait of Hormuz remains a key risk for the rupee, as any prolonged disruption could keep crude oil prices elevated and increase India’s import bill and dollar demand.
US Inflation, yields keep dollar supported
The latest US inflation data offered little relief to emerging-market currencies. US consumer inflation eased marginally to 3.4% in July from 3.5% in June, in line with expectations. While the dollar initially weakened after the data, it soon recovered.
Market experts noted that elevated US Treasury yields remain a more important driver for the dollar. The 10-year Treasury yield was around 4.65%, while the 30-year yield stood near 5.25%, keeping the dollar relatively well supported. High yields could continue to attract capital towards US assets and limit the rupee’s recovery.
Domestic inflation unlikely to shift RBI outlook
Back home, India’s retail inflation rose to 4.45% in July from 4.38% in June. However, the reading remains within the RBI’s target range.
Experts believe the marginal increase in domestic inflation is unlikely to materially alter monetary policy expectations or provide a significant catalyst for the rupee. As a result, crude oil prices, US yields and global risk sentiment are expected to remain the key drivers for the currency in the near term.
Foreign flows provide a cushion
Foreign flows, meanwhile, have emerged as an important support for emerging-market currencies. Emerging markets attracted nearly $18.8 billion in July after two consecutive months of outflows, led by debt inflows and improving sentiment across Asian markets.
India also benefited from the reversal in foreign flows, receiving nearly $1.8 billion in equity inflows and around $210 million in bond inflows during the month. FCNR-related deposits also helped support bond inflows.
Analysts said these inflows are helping absorb some of the external pressure on the rupee and have prevented a sharper depreciation. However, they cautioned that foreign flows alone may not be sufficient to fully offset the impact of elevated crude prices, high US yields and geopolitical risks.
Rupee’s gradual depreciation reflects balancing act
Experts said the rupee is currently caught between opposing forces. On one side are higher oil prices, elevated US yields, a firm dollar and geopolitical uncertainty; on the other are foreign capital inflows and continued RBI intervention.
As a result, the currency’s depreciation has remained gradual rather than turning into a sharp sell-off. Analysts expect developments around the Strait of Hormuz, crude oil prices and global bond yields to remain critical for the rupee’s near-term trajectory.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, the 95.00–95.10 zone remains a key support for USD/INR. With the pair having successfully broken above 95.30 earlier this week, the path towards 95.80 and subsequently 96.20 remains open. While foreign inflows continue to provide support, the broader balance of factors still points towards rupee depreciation.
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