Indian rupee gains 0.16% on RBI-led dollar
The Indian rupee strengthened to 95.83 against the US dollar on Wednesday, recovering from intraday pressure as public sector banks sold dollars, likely
The Indian rupee exchange rate gained 0.16% on Wednesday. This recovery followed a volatile session where the currency faced pressure from foreign investor outflows and dollar demand before a suspected central bank intervention provided support.
The rupee opened stronger at 95.95 per dollar and briefly firmed to 95.93. It then reversed course, falling to an intraday low of 95.9850 in late morning trades. Higher dollar demand from foreign institutional investment outflows weighed heavily. The currency's rebound was driven by large public sector banks selling dollars in bouts. Traders said this activity was possibly on the behest of the Reserve Bank of India to support the local currency.
RBI and market forces shape intraday move
Foreign institutional investment outflows created significant dollar demand, pushing the rupee lower during the session. The recovery was orchestrated by large public sector banks, which were seen selling dollars intermittently. Market participants widely interpreted these sales as being directed by the Reserve Bank of India, aimed at curbing excessive volatility and providing a floor for the domestic currency.
Broader cues support rupee recovery
External factors provided a favourable backdrop for the rupee's appreciation. Broader Asian currencies showed strength, aided by a retreat in global bond yields. A key support was the easing of crude oil prices, a major import cost for India. After trading near $108 a barrel earlier in the week, the price of crude oil eased to below $103 on Wednesday.
Dilip Parmar, a research analyst with HDFC Securities, noted the supportive environment. "The rupee appreciated, tracking broader gains across Asian currencies, helped by lower crude prices and a retreat in global bond yields," he said.
Quarterly context shows persistent pressure
Despite Wednesday's gain, the rupee remains under considerable pressure on a quarterly basis. It was one of the worst-performing currencies in Asia during the second quarter of the fiscal year. Over that period, the rupee fell 1.2%. The headwinds were a combination of higher crude oil prices, rising US Treasury yields, and persistent foreign capital outflows.
The rupee's near-term trajectory will hinge on the direction of crude oil prices, the movement of US yields, and the continuity of RBI-supported dollar sales by state-owned banks.
