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The rupee is a relative outperformer among emerging market peers in the past one month, signalling that the worst might be over for the local unit that has fallen less than the currencies of competing major economies against the dollar.

Lower crude oil prices and the weakening dollar index have helped turn the sentiment in favour of the rupee, which is otherwise the worst performing Asian currency this year. The rupee has fallen 7.2% in 2018.

In the past one month, the rupee has lost 0.78% to the dollar but now ranks fifth among Asian currencies: Seven emerging market units, such as the Malaysian ringgit, Chinese yuan, South Korean won, and Indonesian rupiah, have fared worse.

In the past month, the Chinese renminbi lost nearly 3% while the South Korean won weakened more than 1%, show data from Bloomberg.

“In the last few weeks, oil prices have come off highs, resulting in an improved outlook on the rupee,” said Badrinivas Chakravarthy, managing director, country treasurer & head – local markets treasury at Citibank India. “The current concerns and escalation of tensions on international trade have led to sharper fall in currencies like the Yuan and other export dominated economies, leading to the relative outperformance of the rupee during this period.”

“The fall in the rupee earlier this year was largely driven by higher oil prices coupled with large portfolio outflows,” he said.

Crude oil prices have fallen about 3% in the past one month while the dollar index, which measures the unit against major currencies, has shed about half a percent.

President Donald Trump has batted for a weaker dollar, underscoring the disadvantages of a stronger US currency for Washington in the global marketplace. He has even taken a dig at the Federal Reserves stance on interest rates.

On Wednesday, the US and EU agreed to avoid an all-out trade war and work to lower tariffs as they sought to reach an understanding.

The rupee gained 0.42% in the past three trading session to close at 68.66 a dollar on Thursday. It has touched a new record low at 69.13 on July 20.

“If multiple tests to sustain beyond the crucial level at 69 fail, short trades will emerge reversing long dollar positions among institutional speculators,” said Abhishek Goenka, CEO of Mumbai-based advisory IFA Global. “Crude has shown relief followed by a slight weakness in US dollar index lately also supporting the currency.”

The Reserve Bank of India too has been intervening actively in the currency market whenever the rupee crossed the 69 mark, dealers said.

“In an environment where dollar moves continue to be volatile (in either direction), one should look at the rupee relative to a basket of currencies rather than just the US dollar,” said Chakravarthy.

Crude oil remains a key risk as any sudden surge in prices could well trigger a rout for the rupee.

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