Indian rupee logs weekly decline, with RBI intervention curbing losses

The Indian rupee experienced a weekly decline against the dollar, with the central bank's frequent dollar-selling interventions helping to curb further losses caused by uncertainty stemming from the ongoing Middle East conflict. On Friday, the Indian rupee closed at 95.4250 per dollar, showing little change from the previous week's levels, but it had fallen by 0.2% compared to a week earlier.

State-run banks, likely acting on behalf of the Reserve Bank of India, maintained the currency's stability within a narrow 30-paisa range throughout the week, mitigating the effects of sustained dollar demand from importers, fluctuating crude prices, and the expiration of derivative contracts. Oil prices surged following the United States announcing an indefinite naval blockade of Iran, reigniting concerns about potential crude supply disruptions. India heavily relies on oil imports, accounting for approximately 90% of its consumption.

Friday's data revealed that India's wholesale price inflation increased by 9.78% year-on-year in July, slightly easing from the 9.82% jump reported in June. However, the uptick in inflation was primarily attributed to higher energy prices and administrative costs, falling short of the central bank's 4% medium-term target. In a recent report, Barclays economists suggested that the Monetary Policy Committee (MPC) may choose to overlook these elevated inflation figures and maintain a pause in interest rate adjustments for the remainder of 2026, with potential rate hikes of 50 basis points expected in the first half of 2027.

Meanwhile, regional currencies and stocks exhibited mixed performances, while the dollar index decreased by 0.2%, settling at 99.7. The yen showed a slight strengthening trend after reports indicated that the Bank of Japan was considering an interest rate hike in September, potentially increasing rates more aggressively in the future.