Rupee under pressure; Crude oil, bond yields and dollar strength create perfect storm: Naveen Mathur

The Indian rupee is having a rough ride, and the reasons are moving fast. Naveen Mathur, Director, Commodities, Currencies and International Business at Anand Rathi Share, breaks down what is affecting the currency and why the Reserve Bank of India is already quietly taking action.

Crude oil is the biggest villain

Pressure on rupee is intense as crude oil breaks $110 to touch $111 per barrel. India imports about 85% of its oil needs, meaning every dollar rise in crude directly widens the current account deficit and puts renewed selling pressure on the rupee.

But Crude does not act alone. Mathur points to a combination of factors creating a perfect storm for the currency; The dollar index is strengthening globally, US 30-year bond yields have reached their highest level since 2007, the current account deficit has widened, and concerns about rising inflation are returning home.

“It has more to do with fundamental and external weaknesses than anything internal,” says Mathur, adding that this is not a crisis of India’s own making but the result of global forces converging.

How much rupee fell?

In just two trading sessions, the rupee saw a movement of around one rupee, which opened around 96.85 and closed at 96.94. While that sounds modest, the trend is clearly one-way and the underlying pressures show no sign of easing quickly.

RBI is already in the market

Here’s what most retail investors may not realize – the RBI is actively intervening, although its aim is not to defend a certain level but to control volatility and prevent a disorderly fall.

The numbers clearly tell the story. India’s foreign exchange reserves stood at approximately $728 billion in early March, before the outbreak of war. Today they’re sitting around $696 billion, down more than $30 billion a week. Mathur estimates that the RBI has deployed between $21 billion and $28 billion to support the rupee, with around $11 to $12 billion being deployed in March alone.

The central bank’s strategy is deliberate. Instead of holding the rupee at a fixed rate, which would quickly burn through reserves, the RBI is easing sharp swings, giving markets a sense of stability without committing to an unsustainable hedge.

What does this mean for you?

For importers and businesses with dollar liabilities, the message is clear – hedge your exposure now rather than hoping for a reversal. For exporters, a weaker rupee directly boosts competitiveness and realization.

The near-term direction of the rupee will remain hostage to crude oil prices. If geopolitical tensions ease and crude cools, the pressure on the currency will ease meaningfully. Until then, expect the RBI to remain active in the background – cushioning without trying to stop the collapse altogether.