Rupee Hits 1-Month High on Oil Slide

Can the rupee push past 95 despite dollar demand?

Traders say breaking past 95/dollar keeps attracting fresh dollar demand, capping gains. HDFC Securities' Dilip Parmar pegs immediate support near 94.75 and resistance near 95.60, noting the pair's macro bias stays structurally weak even as short-term bargain hunting could push it toward resistance.

Why can't RBI just defend the rupee forever?

FX reserves are finite, and the market size is too large for interventions to hold indefinitely. Once traders sense RBI is defending a level, they expect it to end when reserves run low, prompting a dollar rush that weakens the rupee further, per ideasforindia.in analysis.

How has RBI's low-volatility policy backfired?

Suppressing INR-USD volatility since 2023 cut forward premiums from a historical 3-5% range to 1-2%, encouraging firms to borrow abroad unhedged. RBI data show unhedged external commercial borrowings hit $65.49 billion, 34.4% of such debt, exposing firms to balance sheet risk as the rupee depreciates.

Will RBI hike rates in December, as BoB expects?

Markets remain split. Bank of Baroda's Sonal Badhan expects at least a 25-bps hike in December to keep real rates positive and support the rupee, but RBI has held its 5.50% repo rate and neutral stance, awaiting clearer evidence on oil-driven inflation before acting.

Why would low inflation still trigger a hike?

CPI inflation hit a historic low of 0.25% in October 2025, below RBI's tolerance band, meaning real interest rates (repo minus inflation) have risen sharply. A hike would guard against this reversing if oil-driven price pressure returns and erodes rupee support.

What is RBI's current inflation forecast?

RBI had lowered its FY26 CPI forecast to 2.6% from 3.1%, citing a nine-month food price decline and GST rate cuts from September 2025. But one outlook projects inflation averaging 4.6% this year if energy prices and monsoon risks intensify.

Why did oil prices rebound after their sharp?

Brent's 12% two-session slide reflected optimism over a possible US-Iran deal reopening the Strait of Hormuz. Prices rebounded on Wednesday after Yemen's Iran-aligned Houthi rebels attacked a Saudi oil tanker in the Red Sea, reviving supply-disruption fears even as the wider Hormuz talks stayed on track.

Why does the Hormuz deal matter for oil?

The US, Iran and Oman were reportedly close to a 60-day interim deal to reopen the Strait of Hormuz without tolls, with Washington aiming to announce it soon. That prospect drove Brent's sharp two-session slide before the Saudi tanker attack partly reversed it.

How often have Houthis targeted Saudi tankers?

The Saudi tanker hit was part of a wider pattern: Houthis declared a naval blockade against Saudi Arabia in July, attacking oil tankers repeatedly, with reports citing a fourth such tanker attack since the blockade was announced, alongside strikes on Saudi oil infrastructure and airports.

Has Red Sea shipping disruption eased overall?

Houthi attacks in the Red Sea had actually fallen 84% between January and late November compared with 2024, showing a broader de-escalation trend, even as periodic incidents like the Saudi tanker attack keep reviving short-term supply-risk premiums in oil markets.