The Indian rupee could remain under pressure against the US dollar in the coming weeks, with crude oil prices emerging as a crucial factor influencing its direction, according to a report by Bank of Baroda (BoB). The report expects the domestic currency to move within the 94.75-95.75 range against the dollar in the near term. It highlighted that developments in international oil markets, along with foreign investment flows and global financial conditions, will play an important role in determining the rupee’s performance.
It said, “Higher oil prices are a major factor which will determine the trajectory of INR going forward. Overall, we expect INR to trade in the range of 94.75-95.75/USD in the near-term.”
The currency saw considerable volatility during October 2026 as multiple external factors weighed on its performance. Higher crude oil prices, increasing global bond yields and persistent withdrawals by foreign portfolio investors (FPIs) contributed to the pressure on the rupee.
The rupee came under significant selling pressure at the start of October, slipping towards its record low against the US dollar. The sharp depreciation prompted the Reserve Bank of India (RBI) to introduce measures to stabilise the domestic currency.
Among the steps announced by the central bank was a separate dollar window for oil marketing companies (OMCs), intended to address their foreign exchange requirements. The RBI also introduced measures to restrict speculative activity in the currency market.
The regulatory intervention helped the rupee reverse some of its earlier losses. The currency subsequently recovered by more than 2 per cent, reflecting the impact of the central bank’s actions.
However, the recovery faced fresh challenges as international crude prices remained elevated. Continued FPI selling, a stronger US dollar and uncertainty in global financial markets also contributed to renewed pressure.
Despite these headwinds, the rupee managed to close October 2026 with an appreciation of 0.9 per cent. Bank of Baroda attributed the currency’s resilience during the period largely to the support provided by the RBI.
What Could Influence Rupee Movement In The Coming Weeks?
According to the report, the rupee’s near-term performance may depend more on developments in global markets and investor sentiment than on domestic economic fundamentals.
Several factors could influence the currency’s direction, including fluctuations in crude oil prices, changes in global bond yields and movements in foreign investment flows.
The narrowing gap between domestic and international yields could also affect the attractiveness of Indian assets for overseas investors. Meanwhile, heightened risk aversion in global markets may encourage investors to move towards safer assets, adding to pressure on emerging market currencies.
Continued FPI withdrawals could further weigh on the rupee by increasing demand for dollars in the domestic foreign exchange market.
Bank of Baroda believes that the balance of risks remains tilted towards further depreciation in the Indian currency, although the RBI’s intervention has helped contain some of the volatility.
RBI Intervention Provides Support To Indian Currency
The central bank’s recent measures have played an important role in limiting the rupee’s decline and restoring some stability in the foreign exchange market.
The report said the RBI’s actions also sent a signal to currency market participants that it intends to prevent excessive volatility and maintain orderly movements in the exchange rate.
“RBI measures provided a timely boost to the INR, while also signalling to the markets that the central bank is committed towards ensuring that the movement in exchange rate remain orderly and range bound. This is likely to continue to work in favour of the INR, barring any fresh external shocks,” the report said.
The central bank’s intervention could therefore continue to provide a cushion against sharp currency movements, provided there are no major disruptions in the external environment.
Crude Oil Prices Remain Crucial For Rupee Outlook
While RBI intervention has offered some relief, the report stressed that the broader outlook for the rupee will continue to depend heavily on international developments.
Crude oil prices are particularly important for India because the country relies substantially on imports to meet its energy requirements. An increase in global oil prices can raise the country’s import bill and increase demand for US dollars, potentially putting additional pressure on the domestic currency.
A stronger dollar, sustained foreign investment outflows and uncertainty in global financial markets could further complicate the outlook.
