Two major forex developments underscored the U.S. dollar's renewed strength on Tuesday and Wednesday, with the Indian rupee and Canadian dollar both losing ground against the greenback. The moves highlight the powerful spillover effects of global commodity and inflation trends, which are increasingly shaping monetary policy expectations and investor sentiment—factors that historically weigh on the cryptocurrency market.
Rupee hits fresh low on crude oil surge
The Indian rupee extended its losing streak, touching 87.25 per dollar in early Wednesday trading, as Brent crude futures climbed above $82 per barrel. India, the world's third-largest oil importer, imports over 85% of its crude, and a $10 per barrel increase can add an estimated $15 billion to its annual import bill, according to Reserve Bank of India (RBI) data. Sustained dollar demand from oil marketing companies and a cautious RBI stance have left the currency vulnerable. Economists now expect the central bank to allow a gradual depreciation rather than deplete foreign reserves, even as imported inflation pressures mount.
Loonie retreats on hawkish Fed bets
Meanwhile, the Canadian dollar weakened to near 1.36 per U.S. dollar after Tuesday’s U.S. Consumer Price Index report showed annual inflation at 3.1%, above the 2.9% forecast, and core inflation at 0.4% month-over-month. The hotter-than-anticipated data fueled expectations that the Federal Reserve will maintain its tightening campaign, with markets pricing a 70% chance of a 25-basis-point rate hike at the next meeting. The U.S. Dollar Index (DXY) climbed 0.3%, and USD/CAD pushed higher. While a weaker loonie may benefit Canadian exporters, it raises import costs and complicates the Bank of Canada’s policy path, which could diverge from the Fed’s if Canada’s own inflation data surprises to the downside.
What this means for crypto
A broadly stronger dollar is often a headwind for digital assets, as it tends to pull global capital into U.S. fixed-income instruments and away from riskier bets like bitcoin. Both developments—oil-driven rupee weakness and inflation-fueled hawkishness—amplify the greenback’s appeal, potentially extending the correction in major cryptocurrencies. At the same time, the erosion of purchasing power in emerging markets and lingering inflation uncertainty could eventually drive interest in bitcoin as a store of value, though for now, the short-term correlation remains tilted negative.