The rupee fell 29 paise to close provisionally at 95.22 against the US dollar on Monday, its third straight session of losses. The currency has shed 84 paise over those three sessions, and the pressure is not letting up.

The rupee opened at 94.92 against the dollar in the interbank foreign exchange market, then slid to an intra-day low of 95.26 before settling at 95.22. On Friday it had already dropped 12 paise to close at 94.93. Forex traders pointed to a stronger dollar and a slight rise in US Treasury yields as the main drags, with a recovery in domestic equities doing little to cushion the fall.

The bigger picture is what keeps traders nervous. Elevated crude oil prices and geopolitical tensions in the Middle East weighed on the currency throughout the session. Brent crude was trading 1.41 per cent lower at USD 115.08 per barrel in futures trade, but at those levels oil remains expensive for an import-dependent economy like India’s.

Why a weaker rupee hits home

When the rupee loses value, every dollar India spends on imports costs more in rupees. Crude oil is the biggest item on that bill, and it feeds into fuel, transport and the cost of moving goods across the country. Imported electronics, machinery and other goods become pricier too. Businesses that pay for those inputs often pass the extra cost along, which is how a currency slide tends to reach the household budget, even for families who never buy a dollar’s worth of anything from abroad.

That is the risk traders are pricing in. A rupee that keeps sliding raises the cost of living at the same time that oil prices are already stretched.

What the analysts are saying

“We expect the rupee to trade with a negative bias due to risk aversion amid an escalation of geopolitical tensions in the Middle East and between Russia and Ukraine.”

That was Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, who warned that elevated crude prices amid supply concerns and selling pressure by foreign institutional investors could add to the strain. He also pointed to a possible cushion: any intervention by the Reserve Bank of India may support the rupee at lower levels. He expects the USD-INR spot price to trade in a range of 94.90 to 95.50.

Gaurav Garg, Head of Research at Lemonn, was more cautious about what central bank action can achieve. He flagged 94.30 to 95.50 as the immediate range to watch. A sustained move above Rs 95.50 would signal renewed depreciation pressure, while a break below Rs 94.30 could extend the rupee’s recovery. In his view, the outlook remains cautious, with oil supply risks and the direction of global interest rates likely to outweigh short-term support from central bank measures.

The dollar, the reserves and the stock market

The dollar index, which tracks the greenback against a basket of six currencies, was trading 0.01 per cent higher at 101.82. That modest move was enough to keep pressure on the rupee in a session where the dollar was already firm.

India’s foreign exchange reserves are also under strain. Data released by the Reserve Bank of India on Friday showed reserves declined by USD 5.011 billion to USD 721.016 billion in the week ended October 16. The previous reporting week saw a steeper fall of USD 8.578 billion, taking reserves to USD 726.027 billion. Across those two weeks, the country has lost roughly USD 13.6 billion in reserves.

Domestic equities offered some relief. The Sensex climbed 482.92 points to settle at 73,606.75, and the Nifty rallied 153.20 points to close at 22,753.20. Foreign Institutional Investors bought equities worth Rs 887.65 crore on a net basis on Friday, according to exchange data. That buying helped the stock market hold up, but it did not stop the currency from falling.

The bottom line for the rupee

The rupee’s problem is not one shock but several pressures stacking on top of each other. Crude prices remain high, geopolitical tensions in the Middle East and between Russia and Ukraine are unsettling investors, the dollar is holding firm, and reserves are shrinking. Each of those factors makes the rupee harder to defend.

The next few sessions will show whether the Reserve Bank steps in. Traders are watching the 95.50 level closely. A move above it would confirm that the slide is not finished. A fall back below 94.30 would suggest the currency has found some footing. Until then, the direction of the rupee depends on oil prices and global rates, and both are outside India’s direct control.