One hundred dollar US currency paper note with a stack heap of 500 Rupees Indian currency full frame money cash background.
| Photo Credit:
desifoto
The rupee remained largely stable over the past week, closing at 95.44 against the dollar on Tuesday compared with 95.38 a week ago. The local currency has struggled to find a clear direction as supportive foreign inflows are being offset by renewed concerns over crude oil prices.Foreign portfolio flows remained positive. According to NSDL data, net FPI inflows stood at about $1.1 billion over the past week, taking cumulative inflows in August so far to around $2 billion. The sustained inflows have provided support to the rupee and helped limit downside pressure.However, crude oil prices have started moving higher again. Brent crude futures, currently trading around $88/barrel, declined nearly 5 per cent last week but have rebounded by a little over 5 per cent so far this week. A sustained rise in crude prices could weigh on the rupee by increasing India’s import bill and demand for dollars.Therefore, the support from improving foreign flows is currently being counterbalanced by concerns over the renewed strength in crude oil prices, keeping the rupee largely range-bound.Attention now turns to the US inflation data due on Wednesday. The reading will be closely watched for its implications for the Federal Reserve’s monetary policy outlook and, consequently, the dollar. A significant deviation from market expectations could lead to higher volatility in the dollar-rupee exchange rate.Overall, positive capital flows continue to provide a cushion for the rupee, but rising crude oil prices have limited the scope for appreciation. The US inflation print could provide the next major trigger for the currency.Chart The rupee, after hitting a five-week high of 94.92 by the middle of last week, has been on a decline. This indicates that the resistance around 95 continues to hold.The prevailing price action suggests that the local currency could weaken further from the current level. The nearest support is at 95.80, followed by 96.20. The technical setup in the dollar index also points to the possibility of further downside in the rupee.The dollar index, which has been consolidating since the beginning of August, is hovering near a key trendline support at 99.50. As long as this level holds, there is scope for the greenback to rebound.However, a decisive break below 99.50 can turn the near-term outlook for the dollar index bearish, potentially dragging it to 99 and then to 98.75.Such a decline in the dollar index could provide significant support to the rupee. The local currency can break above 95 and potentially appreciate towards 94.20 if the dollar index breaches 99.50 and extends the fall.The near-term bias appears mildly negative, with the rupee likely to face pressure towards 95.80 and possibly 96.20. However, a break below 99.50 in the dollar index could reverse the trend and help the rupee recover beyond 95. The US inflation data could be the key trigger.Published on August 11, 2026
