Indian Rupee: Elevated Oil keeps INR lagging against US Dollar – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong note Indian Rupee (INR) remains under pressure despite broader US Dollar (USD) weakness, as high Oil prices and importer Dollar demand weigh on the currency. RBI-linked USD sales are containing USD/INR, but the pair’s risks are skewed to the upside, with resistance at 95.90–96. The early closure of the FCNR(B) swap window removes a source of incremental FX inflows.

Rupee struggles despite weaker Dollar

"INR remained under pressure despite the broader USD decline, with elevated oil prices and importer dollar demand continuing to weigh. RBI-linked USD sales appear to have helped contain losses and keep USD/INR from extending higher."

"The overnight USD sell-off and lower US Treasury yields should offer some relief, but the divergence is telling - INR has so far struggled to benefit fully from the weaker USD backdrop while elevated oil prices remains the key headwind given India’s import dependence."

"As such, INR may continue to lag the broader Asian complex unless crude prices ease more meaningfully."

"The early closure of RBI’s concessional FCNR(B) swap window at end-August also removes one source of incremental FX inflow support earlier than expected, although the sizeable inflows so far and potential last-minute rush before 31 Aug may still add to buffer."

"USD/INR last closed at 95.76. Daily momentum shows signs of turning mild bullish while RSI rose. Risks skewed to the upside. Resistance at 95.90, 96 levels. Support at 95.40 (50 DMA), 95.10 levels."