Rupee slips below 95/$ as FII outflows, oil keep pressure on; US Fed weighs

The Indian rupee started the session flat at 95.02/$, down 17 points or 0.18 per cent compared with Wednesday's close of 94.85/$

The Indian rupee opened sharply lower on Thursday, April 30, falling 34 paise to hit a fresh low against the US dollar. The domestic currency started the session flat at 95.02/$, down 17 points or 0.18 per cent compared with Wednesday’s close of 94.85/$. It has slipped below 95 for the first time since March 30. 

According to analysts, sustained FII outflows and elevated crude prices kept pressure on the currency. Also, the US Federal Reserve's hawkish commentary has added further pressure.  

Hawkish signals from the US Fed lifted the dollar and US bond yields, triggering the latest decline. While the US central bank kept policy rates unchanged overnight, the decision revealed its sharpest split since 1992, with three officials dissenting from guidance that still pointed toward a tilt to easing. 

 

Jateen Trivedi, VP research analyst for commodity and currency at LKP Securities, said higher oil prices are significantly increasing India’s import bill and inflation risks, limiting any meaningful recovery in the rupee. The trend remains weak, with the currency consistently facing selling pressure on rebounds, indicating a lack of strong support at higher levels.  The Indian currency, which had strengthened in April after regulatory steps to curb speculation, has now erased all those gains. The rupee has depreciated by 5.24 per cent so far in the current calendar year. 

Kunal Sodhani, treasury head at Shinhan Bank, said the rupee depreciated to fresh lows and made a record closing low of 94.85 levels on Thursday, pressured by the heightened crude oil prices following supply fears (Strait of Hormuz conflict).  

Foreign investors have pulled over $19 billion from Indian equities so far, adding to the currency's depreciation.  

"An unusually divided US Federal Reserve held its key interest rate steady as policymakers grappled with the policy impact of persistent inflation and awaited a looming leadership transition at the central bank. The last time four FOMC members dissented was in October 1992. The meeting likely was the last with Chair Jerome Powell at the helm. He is due to step down from the top job in mid-May, although his term as a Fed governor doesn't expire until January 2028," he said. 

Sodhani expects the rupee to trade in a range of 94.55 to 95.30/40 levels. 

According to a Bloomberg report, India’s efforts to stabilise the under-pressue rupee are expected to face greater challenges in the coming months as weak capital inflows replace speculative positioning as the main pressure point. Despite recent aggressive steps by the Reserve Bank of India to curb speculation, the currency still slipped to a record closing low on Wednesday. 

The RBI has recently introduced a series of measures to curb speculative activity in the forex market and stabilise the rupee amid its record low. 

First, it capped banks’ net open position (NOP) at $100 million, limiting their ability to take large proprietary USD bets and curbing balance-sheet driven currency speculation.  

The central bank also barred authorised dealers from offering INR-linked non-deliverable derivative (NDF) contracts to residents and non-residents, a move aimed at reducing the link between offshore and onshore markets and limiting arbitrage-driven volatility. 

In addition, it restricted the cancellation and rebooking of FX derivative contracts, closing a loophole that often allowed positions to be rolled over or repriced under the guise of hedging, but was widely used for speculative trades.