Rupee falls nearly 20 paise against dollar: What’s driving the near-term outlook

The rupee opened weaker on Wednesday (April 29), slipping 20 paise to 94.74 per dollar from Tuesday’s (April 28's) close of 94.54, extending its recent downtrend amid persistent external pressures.

The decline keeps the currency close to its recent lows, with traders noting that it is now within roughly 0.5% of its all-time low of 95.21 touched in late March.

Bankers and market participants attribute the weakness primarily to sustained dollar demand and limited supply.

A key driver remains elevated crude oil prices, which have increased dollar requirements for imports. Brent crude hovered near $111 per barrel, after rallying more than 20% since April 20, adding pressure on India’s trade balance and currency.

Traders said oil marketing companies continue to be heavy buyers of dollars, while exporters have shown limited appetite to sell dollars forward amid expectations of further rupee depreciation. This imbalance has created a persistent demand-supply gap in the foreign exchange market.

In addition, equity outflows and speculative positioning favouring long-dollar bets have compounded the pressure. Market participants say these factors have made it difficult for the rupee to stabilise in the near term.

Geopolitical developments are also weighing on sentiment. Reports of the United States extending restrictions on Iranian ports have added to supply concerns in global oil markets, keeping prices volatile and reinforcing demand for the dollar.

The broader outlook for the rupee remains weak, with little indication of a meaningful pullback in oil prices. Market focus now shifts to the upcoming policy decision by the Federal Reserve, where interest rates are widely expected to remain unchanged. Investors will watch for signals on future policy direction, which could influence global dollar strength and emerging market currencies, including the rupee.

-With Reuters inputs