The Indian rupee fell below 84 per dollar for the first time on Friday, pressured by concerns over the recent spike in oil prices and foreign outflows from the equity market.
The rupee closed at 84.06, after hitting a record low of 84.08 earlier in the session on Friday. This breach of the 84 level is significant, as the Reserve Bank of India (RBI) had been defending that threshold for over two months. Earlier in the week, the RBI had informally advised banks to avoid taking heavy positions against the rupee.
On Friday, the RBI intervened again, with traders reporting that large state-run banks sold dollars, likely at the central bank’s behest, to prevent a sharper decline in the rupee.
The rupee had strengthened to around 83.50 two weeks ago, but its outlook worsened as the Middle East conflict pushed up oil prices, foreign investors sold Indian shares, and hopes for significant U.S. rate cuts diminished.
Factors Affecting the Dollar/Rupee Rate
Fed Rate Expectations: The U.S. Federal Reserve is now unlikely to cut its key policy rate by 50 basis points in November, and it may even skip a rate cut altogether. This marks a shift from earlier expectations of a reduction. Despite this change, the dollar (USD) is on track for its second consecutive weekly gain, supported by a robust jobs report. This data reduced expectations for a large rate cut and triggered outflows from riskier Asian assets, including the rupee.
Rising Oil Prices: Brent crude oil prices surged by around 8% last week, reaching a high of $81.82 on August 29. The spike was driven by increased U.S. fuel demand ahead of Hurricane Milton, heightened Middle East supply risks, and signs of growing energy demand in both the U.S. and China. This rise in oil prices has weighed heavily on market sentiment and impacted the rupee, as India is a major importer of crude oil.
Foreign Outflows from Indian Equities: Indian equities have witnessed significant outflows, with overseas investors turning into heavy sellers over the last nine trading sessions. Combined with Brent crude prices rising more than 8% so far in October, this has further pressured the rupee as foreign investors retreat from Indian markets.
Technical Outlook – U.S. Dollar / Indian Rupee
The USD/INR pair surged to a high of 84.08 before closing at 84.06 on Friday, marking its largest single-day gain since August 21, 2024.
On the technical chart, a long bullish candlestick formation signals strong upside momentum. However, the pair is currently trading near a significant resistance level at 84.12, which aligns with the upper boundary of the short-term ascending range. A breakout above this level would pave the way for the next resistance zone between 84.18 and 84.25.
In contrast, failure to break through could trigger a corrective move toward the support levels of 84.01–83.92.
Moreover, with the Reserve Bank of India actively intervening to defend the rupee, further downside may be capped. Yet, the combination of rising oil prices and sustained foreign equity outflows could continue to exert downward pressure on the rupee.
The key question remains whether the RBI’s actions will be sufficient to stabilize the currency or if external factors will drive it lower.
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