Indian Rupee Holds Steady Amid RBI Action Despite Strong U.S. Dollar

The Indian rupee managed to eke out a modest gain against the resurgent U.S. dollar on Wednesday, thanks to timely intervention by the Reserve Bank of India (RBI). Trading at 83.19 per dollar, the rupee showed resilience, recovering slightly from its previous close of 83.25. During the session, it grazed a low of 83.28, uncomfortably close to its all-time nadir of 83.42, which occurred on August 15 this year.

The RBI, demonstrating a measured approach, deployed its arsenal by selling dollars through state-run banks at levels between 83.23 and 83.24, according to a forex trader at one of these institutions. This intervention served to provide a consistent stream of dollars, lending much-needed support to the rupee.

Yet, the rupee’s fortitude was tested by the soaring dollar, which soared to a nearly 10-month pinnacle of 106.60 against a basket of currencies. This ascent was underpinned by anticipations of heightened U.S. interest rates in the impending months.

Across Asia, most currencies stumbled in the face of the resurgent greenback, with the Thai baht leading the retreat with a 0.54% dip.

Oil Prices Complicate Things for the Indian Rupee

Complicating matters for the rupee were escalating oil prices, as Brent crude oil futures marked a 1.7% upswing, reaching $94.06 per barrel. As a net importer of oil, India’s import bill swells in the wake of rising prices, thereby expanding its current account deficit.

Nonetheless, the rupee discovered some solace from importers who bolstered their hedging positions to shield themselves from further currency depreciation, traders reported.

Forex analyst Gaurang Somaiya from Motilal Oswal Financial Services predicts the rupee will remain range-bound between 82.80 and 83.30 until the next RBI monetary policy decision on October 6, as cited by Reuters.

On the horizon, investors eagerly anticipate the announcement on September 28 from FTSE Russell regarding India’s potential inclusion in its emerging markets government bond index.

Please note that Indian forex and debt markets will remain closed on Friday due to a local holiday.

 

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