Rupee Slides Toward 95.4 as Oil Surge and US CPI Test RBI

The Indian rupee came under renewed pressure this week as surging oil prices and a weaker Asian currency complex weighed on sentiment, leaving traders watching both the Reserve Bank of India's intervention and a key United States inflation print for direction.

On August 12, 2026, the rupee hovered around 95.4 per dollar, edging lower after a modest gain in the previous session. Brent crude had climbed 7% over the week and was approaching $90 a barrel, prompting importers to step up hedging and boosting dollar demand.

Contents

01

Why Oil Prices are Driving the Rupee

02

The Central Bank Steps in to Steady the Currency

03

Inflation Data Sets the Stage for the Fed

04

India's Own Inflation Stays within the Band

Why Oil Prices are Driving the Rupee

The currency's weakness is tied to India's heavy reliance on imported energy. Currencies of oil-importing economies tend to underperform when crude prices rise, and the rupee was no exception. The Indian currency underperformed in the opening session on Wednesday as surging oil prices prompted risks of higher foreign outflows.

A key driver is a prolonged supply disruption at the Strait of Hormuz, a chokepoint for nearly one-fifth of global energy supply, amid US-Iran tensions. Kpler data recorded just six vessels transiting on August 10, down from a recent 10-day average of about 11 and far below pre-war levels of 130 to 140 ships daily.

The Central Bank Steps in to Steady the Currency

The Reserve Bank of India has been selling dollars through state-run banks in both trading sessions this week, with traders saying the rupee would likely have weakened further without that support. The intervention helped the rupee recover early losses on Wednesday, with USD/INR trading slightly lower near 95.33 at press time.

The RBI had earlier in August left its key policy rates unchanged and trimmed its inflation forecast for the current financial year to 5% from the 5.1% projected in June.

Inflation Data Sets the Stage for the Fed

Investors keenly awaited the United States Consumer Price Index data for July, scheduled for release at 12:30 GMT on Wednesday. US inflation data was expected to provide clues on whether the Federal Reserve would raise interest rates the next month, with markets split over the prospect of a hike.

Brown Brothers Harriman's Elias Haddad expected the US July CPI to show headline inflation rising 0.1% month-on-month and easing to 3.4% year-on-year, with core CPI rising 0.2% month-on-month and easing to 2.5% year-on-year.

India's Own Inflation Stays within the Band

India's retail Consumer Price Index inflation for July accelerated to 4.45% year-on-year, from 4.38% in June, almost matching expectations of 4.5% and remaining within the RBI's 2%-6% tolerance band.

The MCX Crude Oil contract expiring on August 19 traded flat at around Rs. 7,950 on Wednesday, close to its weekly high of Rs. 8,075 posted on Tuesday.

Meanwhile, mediators from Pakistan expressed optimism about progress in US-Iran negotiations, with Defence Minister Khawaja Asif saying things were shaping up in favor of a peace arrangement or a deal, according to Bloomberg.