Rupee Opens 8 Paise Higher at 87.13 Against Dollar Amid Cooling Prices and Lower Crude Costs

The rupee opened 8 paise higher against the U.S. dollar on March 13, buoyed by easing inflation and a sharp decline in crude oil prices. The local currency started the trading session at 87.13 per dollar, strengthening from its previous close of 87.21.

In the global currency market, the dollar index, which measures the greenback’s performance against six major currencies, was at 103.553 in early trade, marginally lower than its previous close of 103.612. The U.S. dollar’s movement remains a key factor influencing emerging market currencies, including the rupee.

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Declining Inflation and RBI’s Policy Outlook

India’s retail inflation softened to a seven-month low of 3.61% in February, slipping below the Reserve Bank of India’s (RBI) 4% target for the first time in nearly two years. This decline has strengthened expectations of a possible rate cut in the RBI’s upcoming April policy meeting. Lower inflation reduces the pressure on the central bank to maintain high interest rates, potentially leading to a more accommodative monetary stance that could support economic growth.

This marks only the third time in the current fiscal year that inflation has fallen below 4%. Additionally, the February inflation figure came in lower than the 3.8% median forecast of 19 economists surveyed by MC. The drop was driven by softer food prices and lower energy costs, providing relief to consumers and policymakers alike.

Crude Oil Prices and Rupee’s Performance

A significant 15.50% decline in crude oil prices—from $81.73 per barrel to $69 per barrel—has helped ease India’s import bill. As a major crude importer, India benefits from lower oil prices, reducing the country’s trade deficit and supporting the rupee.

Amit Pabari, Managing Director at CR Forex Advisors, noted that the rupee’s appreciation is supported by these factors. However, external risks such as global interest rate trends and geopolitical uncertainties could still impact currency movements.

Outlook for USD/INR

Pabari also projected that the USD/INR currency pair is likely to trade within the 86.80-87.40 range in the near to medium term. While the rupee has gained support from falling inflation and crude prices, global market movements, foreign fund inflows, and RBI interventions will play a crucial role in determining its future trajectory.

Market participants will closely watch upcoming U.S. inflation data, Federal Reserve policy signals, and global risk sentiment, as these factors could influence investor appetite for emerging market assets, including the Indian rupee.