Rupee Posts Modest Weekly Gain as US-Iran Peace Hopes and RBI Support Offset Oil-Led Pressures 

Mumbai, Aug 9: The Indian rupee concluded the trading week with a modest weekly gain, appreciating approximately 0.2% against the US dollar, as a sharp decline in crude oil prices and hopes of a diplomatic breakthrough between the United States and Iran outweighed late-week pressures from rising oil prices and geopolitical uncertainties. The currency traded in a range of 94.92 to 95.40 during the week, supported by persistent intervention from the Reserve Bank of India (RBI) and strong foreign exchange inflows under the central bank’s balance of payments strengthening measures. 

The rupee, which had closed at 95.38 on the previous Friday, opened the week on a strong note as US President Donald Trump announced he had called off a planned strike against Iran and would pursue fresh negotiations with Tehran. However, the currency gave up some gains by Friday as crude oil prices rebounded and risk aversion crept back into global markets. 

Rupee Surges 31 Paise to 95.12 in Early Trade on Monday as Crude Oil Plunges 

The rupee opened the week with a significant gap-up, surging 31 paise to 95.12 against the US dollar in early trade on Monday, August 3, following a steep fall in global crude oil prices and a softer greenback after Trump decided to hold off strikes against Iran. The dollar index fell toward 99.5 on Monday, extending its decline to a fifth consecutive session after Japan confirmed it had carried out coordinated yen-buying operations with the US. 

At the interbank foreign exchange market, the rupee opened at 95.15 against the greenback before rising further to 95.12, marking its highest level in nearly a month. Brent crude futures fell nearly 5% toward $83 a barrel after Trump held off on a fresh attack and signalled that an agreement with Iran was close. FII inflows, a rise in the country’s forex reserves, and RBI support further strengthened the local unit. 

Rupee Cuts Early Gains, Ends Flat at 95.31 as Importer Dollar Demand Emerges 

Despite the strong opening, the rupee ended Monday little changed, retreating from a three-week high hit in early trade, as dollar demand from importers and state-run banks gathered pace. The currency, which climbed to a peak of 95.1275 as Brent crude prices slumped, ended at 95.3375 per dollar, down from the 95.38 previous close. 

“There were very strong dollar bids around 95.15 levels from state-run banks, likely on behalf of clients,” a trader at a Mumbai-based bank said. The rupee has rebounded by more than 3% in the six trading sessions to Monday, aided by FII inflows and easing of tensions in the West Asia region. The RBI data released on Friday showed that the country’s forex reserves jumped $6.118 billion to $682.354 billion during the week ended July 24. 

On the domestic equity market front, the Sensex rose 544.39 points, or 0.70%, to close at 78,639.03, while the Nifty was up 390.70 points, or 1.60%, to settle at 24,774.30. 

Rupee Slips 3 Paise to 95.40 on Tuesday as Elevated Oil Prices Weigh 

On Tuesday, August 4, the Indian rupee reversed part of its previous session’s gains, slipping 3 paise to close at 95.40 against the US dollar amid higher crude oil prices, a stronger US dollar, and weakness in domestic equities. The currency traded in a narrow range of 95.25–95.42, supported by dollar sales from foreign banks and continued foreign fund inflows.  

However, importer demand for dollars, particularly from oil refiners and gold importers, capped gains. Meanwhile, the Sensex fell 210.08 points and the Nifty declined 159.40 points, reflecting broader market weakness. 

Rupee Jumps to One-Month High on Wednesday, Opens Below 95 for First Time Since July 

Wednesday, August 5, was the strongest session for the Indian rupee during the week, with the currency opening 46 paise higher at 94.92 against the US dollar—its strongest level since July 1 and the first time it traded below the 95-per-dollar mark since July 8. The rupee eventually settled at 95.12, compared with 95.38 in the previous session, supported by a sharp decline in global crude oil prices and optimism over potential progress in US-Iran diplomatic talks. 

The rupee’s rally was largely driven by falling crude oil prices, with Brent crude declining from around $102 per barrel to below $79, significantly easing concerns over India’s import bill. Brent prices had dropped 5.2% on Tuesday and extended losses by another 1% in Asian trading after comments from Qatari and US officials raised hopes of a diplomatic resolution to the prolonged Iran conflict. 

During the day, the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.25% and retained its neutral policy stance, in line with market expectations. RBI Governor Sanjay Malhotra also confirmed that the central bank had no plans to discontinue its concessional foreign exchange swap scheme before schedule. While the policy decision limited some of the rupee’s early gains, the domestic currency still ended at its strongest closing level in nearly a month, supported by easing crude prices and sustained foreign exchange inflows. 

Rupee Falls 16 Paise to 95.24 on Thursday as Dollar Recovers 

Thursday, August 6, saw the rupee depreciate 16 paise to close at 95.24 (provisional) against the US dollar, on slight gains in the US Dollar Index and a modest increase in US treasury yields. Forex traders said the rupee was pressured by a slight recovery in the US dollar index and foreign fund outflows, even as lower crude oil prices provided some underlying support. 

At the interbank foreign exchange market, the rupee opened at 95.13 against the greenback and traded in a range of 95.12-95.24 during the session. On Wednesday, the rupee had gained 20 paise to settle at 95.08 against the US dollar. 

“Indian rupee declined today on a slight bounce in the US dollar index and modest gains in the US treasury yields. However, weak crude oil prices and hopes of a deal between the US and Iran prevented a sharp fall,” said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan. The dollar index was trading at 99.78, down 0.11% , while Brent crude was trading higher by 0.09% at $79.52 per barrel. 

For India, Brent near $80 per barrel substantially reduces pressure on the import bill, inflation, and the current account compared with the $100+ levels seen in July, said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP. On the domestic equity market front, Sensex climbed 373.76 points to settle at 78,954.76, while the Nifty closed marginally up by 11.35 points to 24,636. 

Foreign Institutional Investors turned to selling and offloaded equities worth ₹943.42 crore on a net basis on Wednesday, according to exchange data. 

Rupee Settles Flat on Friday as RBI Intervention Shields Currency from Oil-Led Pressures 

Friday, August 7, saw the rupee settle on a flat note, higher by just 2 paise at 95.22 (provisional) against the US dollar, on heightened risk aversion due to fragile negotiations between Iran and Oman over the Strait of Hormuz. Risk aversion in global markets and an overnight jump in crude oil prices weighed on investor sentiments. 

At the interbank foreign exchange, the rupee opened at 95.27 against the greenback and traded in a range of 95.19-95.28 during the session. It eventually settled at 95.20 (provisional), higher by 2 paise from its previous close. 

The Reserve Bank of India likely intervened in the foreign exchange market on Friday, three traders told Reuters, as a jump in oil prices over risks of escalation in West Asia pressured the currency. The rupee appeared on track to open weaker around 95.35-95.40 per dollar, but central bank intervention right around the time the local spot market opened at 9:00 am IST helped shore up the currency. 

Brent crude oil futures were up 1.3% at $83.6 per barrel. The rupee was last at 95.2650, little changed from the previous session. On Friday, dollar sales by state-run banks, most likely on behalf of the Reserve Bank of India, kept the rupee on a tight leash, with the currency’s intra-day range shrinking to a multi-month low. 

The rupee closed at 95.2075 per dollar, barely changed from its close at 95.22 in the previous session, but up about 0.2% week-on-week. Strong inflows under measures to strengthen India’s balance of payments have bolstered the central bank’s ammunition to defend the rupee. India’s largest lender, State Bank of India, has raised about $6 billion under a scheme to attract overseas FX deposits, and it expects its final tally to stand at about $10 billion by the end of September. 

Indian shares ended Friday’s session lower amid a resurgence in geopolitical and trade tensions. The BSE Sensex closed down 455.59 points (0.58%) at 78,499.17, while the NSE Nifty 50 declined 65.35 points (0.27%) to settle at 24,570.65. 

Key Factors Driving the Rupee During the Week 

Several factors influenced the rupee’s movement during the week. The sharp decline in crude oil prices was the primary positive driver. Brent crude fell from approximately $102 per barrel to below $80 per barrel during the week, reducing pressure on India’s import bill. The dollar index weakened, trading around 99.5-100, making dollar-denominated assets less attractive. Hopes of a diplomatic breakthrough between the US and Iran boosted global risk sentiment. 

Persistent RBI intervention in the foreign exchange market helped stabilise the currency. The central bank’s measures have attracted inflows of over $40 billion, with State Bank of India, HSBC, and ICICI Bank garnering the largest amounts under the mechanism. Strong foreign exchange inflows under the balance of payments strengthening measures have bolstered the central bank’s ammunition to defend the rupee. 

However, several factors capped the rupee’s gains. Importer dollar demand, particularly from oil refiners and gold importers, exerted downward pressure on the currency. Elevated crude oil prices towards the end of the week, with Brent rising to $83.6 per barrel, weighed on sentiment. Geopolitical uncertainties surrounding the Strait of Hormuz and fragile US-Iran negotiations added to risk aversion. A slight recovery in the US Dollar Index and modest gains in US treasury yields also pressured the rupee. 

The rupee ended the week with a modest gain of approximately 0.2% against the US dollar, supported by a sharp decline in crude oil prices, hopes of a diplomatic breakthrough between the US and Iran, and persistent RBI intervention in the foreign exchange market. The currency traded in a range of 94.92 to 95.40 during the week, with the RBI’s measures attracting inflows of over $40 billion and bolstering the central bank’s ammunition to defend the rupee. Market participants closely monitored geopolitical developments in West Asia, crude oil price movements, and the RBI’s monetary policy stance, which remain critical factors for the rupee’s near-term trajectory 

Source 

• https://rbi.org.in/ 
• https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=63285