Rupee ends week flat as oil surge hits assets

The Indian rupee ended the week little changed against the US dollar after weakening for a second consecutive session on Friday and giving up gains made earlier in the week. The currency opened the session marginally higher at 94.79 per dollar but soon turned lower, hitting a low of 94.9725 before closing at 94.9400, down 0.1% for the day. This followed a 0.4% depreciation on Thursday, reversing the support that had briefly lifted the rupee during the week.

In early trade on Friday, the rupee had risen by 3 paise to 94.78 at the interbank foreign exchange market, compared with a previous close of 94.81 on Thursday. However, the initial strength did not hold as broader risk aversion and demand for dollars from importers pushed the currency lower into the close. For the week, the rupee was little changed, after having risen 1.4% in the prior week.

A sharp rise in global crude prices was a central factor pressuring the rupee. Brent crude (UKOUSD) hovered around $114 per barrel and touched a more than five‑month high, putting renewed focus on India’s imported energy costs. Energy prices have remained elevated, fuelling concerns about inflation and their impact on the nation’s current account calculations.

Higher oil prices coincided with a broader pullback from riskier assets. Investors reassessed technology and artificial‑intelligence‑linked trades, leading to a selloff in equities and stronger demand for safe‑haven US Treasuries. This shift in risk appetite contributed to demand for the dollar and weighed on the rupee despite other supportive factors.

Expectations for further interest rate hikes by the US Federal Reserve eased markedly over the past month, with the perceived odds of another hike dropping to single digits from as high as 70%. This reassessment provided some temporary relief for the rupee in early sessions as the dollar’s upward momentum moderated. However, the supportive effect of softer rate expectations was outweighed by concerns linked to oil and imported inflation.

Market participants also pointed to the unwinding of dollar‑long positions following recent measures by the Reserve Bank of India, which had helped push the rupee to a six‑week high of 94.30 per dollar on Thursday before the latest reversal. Currency traders said residual flows related to the Jio Platforms initial public offering had previously underpinned the currency.

Conditions in Indian financial markets reflected the broader risk‑off mood. Foreign institutional investors were net sellers of domestic equities to the tune of ₹3,458.70 crore on Thursday, adding pressure to the rupee and local asset prices. Persistent macroeconomic headwinds, including global dollar strength and high crude prices around $113–114 per barrel, kept sentiment cautious.

Forex traders noted that these headwinds left the rupee under pressure despite moments of intraday strength. With oil prices on track for a third straight weekly surge and energy‑driven inflation worries in focus, the currency struggled to extend last week’s gains, closing the week broadly flat against the US dollar.