Rupee holds near ₹95.7 as RBI intervention offsets oil, bond yield pressures

The Indian rupee held steady near ₹95.7 on Wednesday, resisting downward pressure from rising oil prices and a global bond yield surge, thanks to the Reserve Bank of India's ongoing interventions. The currency was trading at 95.7250 per dollar at 10:30 a.m. IST, a slight drop from Tuesday's close of 95.68. This calm came despite oil prices reaching their highest levels in three weeks, causing investor uncertainty over the Strait of Hormuz's status due to conflicting statements from Tehran and Washington.

U.S. President Donald Trump stated no negotiations were underway with Iran, asserting the Strait remained open, which stood in contrast to Iran's claim that it remained closed to shipping. This uncertainty amplified the rupee's stress, exacerbated by a rise in global long-term bond yields, particularly in Japan, as investors worried about inflation and fiscal deficits.

However, the Reserve Bank of India's consistent interventions provided stability for the currency. The rupee's 1-month implied volatility, an indicator of future expectations, fell to under 4%, its lowest since January. Additionally, a major Indian conglomerate's regular participation in option structures that sell implied volatility has aided in lowering volatility, as confirmed by a banker from a Mumbai-based bank.

Conversely, the conglomerate has also been a significant buyer of spot dollars in recent sessions, according to a second banker from another Mumbai-based lender, both preferring to remain anonymous. Later, the market will likely focus on the RBI and U.S. Federal Reserve's monetary policy reviews, where both central banks decided to maintain policy rates unchanged.