India’s rupee faces pressure from rising global oil prices despite $2.1bn in July equity inflows and stronger capital flows.
The Indian rupee’s near-term appreciation prospects are limited by a rebound in global oil prices, pushing USD/INR toward the 95.50 level before intervention. Capital inflows into equities and debt reached $2.1bn and $700m in July, respectively, but higher oil costs weigh on the currency.
June inflation accelerated to 4.4% year-on-year, an 18-month high, driven by food price normalization and fuel price hikes in mid-May. The impact of elevated oil prices continues to filter through economic data, complicating the rupee’s outlook.
Monsoon rainfall deficits have narrowed, though recent weakening in momentum adds to economic uncertainty. Policymakers remain vigilant over weather and geopolitical risks.