The Indian rupee closed at 95.4 against the US dollar on Thursday, down 15 paise from its previous close of 95.25, according to a report by Business Today. The decline came as a surprise spike in dollar demand fueled market speculation that state-owned oil marketing companies (OMCs) have resumed direct purchases in the foreign exchange market.
The rupee opened the session at 94.35 and touched an intraday low of 95.35, a fall of one rupee in a short period, even as most Asian currencies strengthened against the dollar and international crude oil prices remained near pre-Middle East conflict lows.
Market Reaction and Rupee Movement
The sudden dollar demand caught traders off guard. The Reserve Bank of India (RBI) had earlier this year shifted OMCs—the country's largest importers of crude oil—to a separate purchase window in an effort to reduce market demand for dollars and contain rupee volatility. The move had successfully limited sharp swings in the exchange rate.
| Metric | Value |
|---|---|
| Rupee close (vs USD) | 95.40 |
| Previous close | 95.25 |
| Change | –15 paise |
| Intraday high | 94.35 |
| Intraday low | 95.35 |
OMCs and Dollar Demand Speculation
According to unconfirmed market reports cited by forex consultant KN Dey, public sector oil marketing companies have initiated substantial US dollar remittances to cover crude oil imports scheduled over the next couple of months. These forward transactions were reportedly locked in at Brent crude prices near pre-war levels of $71 per barrel, stimulating an immediate surge in US dollar demand.
"According to unconfirmed market reports, public sector oil marketing companies have initiated substantial US dollar remittances to cover crude oil imports scheduled over the next couple of months. These forward transactions, reportedly locked in at Brent crude prices near pre-war levels of $71 per barrel, have stimulated an immediate surge in US dollar demand," Dey added.
Expert Analysis and Outlook
KN Dey, a forex consultant, commented on the rupee's movement, noting that the sharp depreciation occurred despite a broadly positive backdrop for the currency. "The rupee, which opened at 94.35 on Monday morning, touched 95.35 today, a difference of a rupee in such a short period when almost everything was positive for the rupee. I think the rupee would return towards 94.25 levels next week once this temporary dollar demand ends," Dey said.
Implications for Trade Finance and Business
The return of OMCs to the spot forex market—if confirmed—would have direct implications for corporate treasuries and trade finance professionals. Oil companies are the largest importers in India, and their regular dollar purchases can swing the exchange rate significantly. For CFOs and treasury directors managing cross-border payments and hedging strategies, the renewed dollar demand signals a potential increase in FX volatility and hedging costs.
If OMCs continue to operate through the separate RBI window, the spike may prove temporary. However, any persistent demand from state-owned buyers could keep the rupee under pressure, increasing the cost of imports for other businesses and raising the cost of capital for trade finance instruments denominated in dollars.
Market participants will closely watch RBI's next move. The central bank's intervention in the OMC window had previously stabilized the rupee. A return to open market purchases by OMCs could force RBI to recalibrate its FX policy to prevent excessive rupee depreciation.
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