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Informist, Thursday, Jul. 23, 2026

By Divya Moolayattil

MUMBAI – The rupee is expected to extend its fall against the dollar as Brent crude oil prices crossed $95 per barrel with the US and Iran intensifying attacks on each other and neither side willing to back down. Iran Wednesday hit a ship transiting the Strait of Hormuz and Iranian-backed Houthis attacked Saudi Arabia's oil tankers in the Red Sea. US President Donald Trump warned that US forces would bomb an Iranian bridge or power plant every time Iran hit a ship in the Strait of Hormuz. 

Oil prices extended gains for the fifth consecutive day, with Brent crude for September delivery rising over 2% to hit $96 a barrel, the highest level since Jun. 8. Brent crude has gained about $10 a barrel over the past week after a series of sharp increases. The cost of Brent crude is up 30% since the start of the war. 

"If crude keeps rising like this and sustains over 100 ($/barrel), then it will be difficult for the RBI to defend 97 (a dollar)," a dealer at a brokerage firm said. 

The rupee is expected to open broadly steady at around 96.55-96.60 a dollar after it settled at 96.57 Wednesday. The Indian unit is likely to move in a range of 96.40-96.70 against the dollar Thursday. The rupee fell 0.3% in the previous session as importers bought dollars in a panic mode. 

Despite a jump in crude oil prices, many dealers expect the rupee to trade in a narrow range against the dollar as the Reserve Bank of India may step in and sell dollars, likely at 96.65 a dollar, to contain the depreciation. However, the intervention may not be aggressive in nature, they said. "If RBI intervenes to the tune of $1 billion-$2 billion, it will only help to restrict the rupee at current levels which it is already doing," a dealer at a brokerage firm said. 

The rupee is now just 40 paise away from the record low of 96.96 a dollar. The Indian unit emerged as the worst-performing currency among its Asian peers Wednesday. The rupee was also the worst-performing currency in July, having depreciated more than 2%.  

Dealers said once the rupee hits 96.70 a dollar in the spot market, the one-year non-deliverable forwards outright rate would be aligned at 100, which is likely to trigger model selling of the dollars. 

Dealers also expect banks to actively buy dollars on behalf of importers, amid uncertainty over the war in West Asia, which will weigh on the Indian unit. Exporters are likely to enter the market actively if the rupee crosses 96.70 a dollar, they said. 

Banks are likely to sell dollars due to inflows from foreign funds, which may support the Indian unit. Dollar inflows gathered pace after the RBI and the government announced a slew of measures to attract foreign inflows. Foreign portfolio investors have made net investments of $3.09 billion so far in July, the highest foreign fund inflows since the war began.

FORWARDS

The one-year dollar-rupee forward premium is expected to rise as banks may buy dollars for forward delivery on behalf of importers, fearing depreciation of the rupee, dealers said.

On an annualised basis, the premium on the one-year exact-period dollar-rupee forward contract is seen at 2.95-3.10% Thursday. On Wednesday, it settled at 2.93%. On an absolute basis, the premium ended at 284.83 paise.

End

US$1 = INR 96.57

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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