Rupee Opens Lower at 92.42 Amid Oil Price Pressure and Capital Outflows

The Indian rupee opened at 92.42 per US dollar on Wednesday, March 18, down 5 paise from Tuesday’s close of 92.37. The currency remained under pressure from rising crude oil prices and continued capital outflows, weighing on market sentiment.

Near-Term Outlook and RBI Intervention

Market participants expect the dollar/rupee pair to trend slightly higher in the near term, as crude oil hovers near $100 per barrel. However, the Reserve Bank of India’s active presence around the 92.50 level is likely to limit sharp depreciation and curb speculative trading unless there is strong underlying demand for dollars.

Rupee Vulnerability Amid Equity Outflows

Over the past three sessions, the rupee has stayed close to 92.50, with central bank measures preventing a decisive breach. Analysts note that the currency remains exposed due to a combination of foreign equity outflows, heightened corporate hedging driven by high oil prices, and speculative positioning against the rupee. Foreign investors have withdrawn over $8 billion from Indian equities since the start of the Iran conflict, contributing to a more than 6% decline in the Nifty 50 this month.

Global Cues and Federal Reserve Policy

Investors are also focused on global developments, with the Federal Reserve scheduled to announce its policy decision later in the day. Economists widely expect the Fed to keep interest rates unchanged. Market expectations for rate cuts have moderated, now pricing in around 25 basis points of easing for the year, down from over 50 basis points earlier.

Fed Projections in Focus

Investors will closely monitor the Fed’s updated economic projections for signals on inflation and growth. Analysts expect the forecasts to indicate higher inflation and slower growth, while suggesting that policymakers may look past oil-driven price pressures when making policy decisions.

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