Rupee opens 12 paise lower at 96.40 against US dollar

The Indian rupee opened 12 paise weaker at 96.40 against the US dollar on Monday, 20 July, as a fresh surge in crude oil prices and escalating geopolitical tensions in the Middle East weighed on sentiment.

The domestic currency has declined 1.7% so far this month and is now inching closer to its record low of 96.96 per dollar, hit in May. The latest bout of weakness follows Brent crude climbing above $90 a barrel, driven by an intensification of the US-Iran conflict.

The rupee had briefly recovered after crude prices retreated towards $70 per barrel and the Reserve Bank of India (RBI) introduced measures to boost dollar inflows. Improved foreign portfolio investment into Indian equities also provided temporary support to the currency.

However, those gains have quickly faded as oil prices resumed their upward trajectory. Brent crude futures advanced 2.7% on Monday, breaching the $90-a-barrel mark for the first time in nearly six weeks, renewing concerns over India's import bill and inflation outlook.

Geopolitical risks have intensified after the United States launched a ninth consecutive night of strikes on Iran, while Kuwait and Bahrain reported fresh Iranian attacks. The conflict has also disrupted shipping activity through the Strait of Hormuz, with both sides targeting maritime traffic, raising fears of further supply disruptions and keeping pressure on oil prices and the rupee.

Dollar finds support despite cooling inflation

Currency experts noted that while softer US inflation had weakened expectations of an immediate Federal Reserve rate hike, the dollar has continued to find support from resilient economic data. US consumer sentiment climbed to 54.4 in July, its highest level since February and well above market expectations, reflecting stronger household confidence. However, analysts pointed out that much of the survey was conducted before the latest escalation in the U.S.-Iran conflict pushed fuel prices higher. The Dollar Index remained steady near 100.80, limiting any meaningful relief for emerging market currencies, including the rupee.

RBI's Reserve position faces fresh scrutiny

Market participants said India's foreign exchange reserves continue to provide an important buffer, but the headline figures do not capture the RBI's forward commitments. Foreign exchange reserves stood at around $675 billion for the week ended 10 July, while the central bank's net short forward dollar position was $106.66 billion at the end of May. Analysts expect these forward commitments to have increased further as the RBI continued intervening in the currency market following renewed geopolitical tensions. As a result, they believe the effective intervention buffer may be lower than what the headline reserve figure suggests.

Trade deadline adds another layer of uncertainty

Experts also expect trade developments to remain in focus this week. The temporary 10% US tariff relief on Indian exports is due to expire on 24 July, with negotiations between India and the US reportedly entering the final stages. While discussions are progressing, India is seeking tariff treatment comparable to countries such as Vietnam and Indonesia. Any delay in reaching an agreement could add another source of uncertainty for exporters and weigh on overall market sentiment.

Rupee Outlook

According to Amit Pabari, MD, Research Team, CR Forex Advisors, from a technical perspective, 96.10–96.20 is likely to act as a strong support zone, while 96.50 is expected to be a key resistance level. This resistance is likely to be broken soon, potentially pushing the rupee towards the 97.00–97.50 range.

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