Indian Rupee strengthens due to strong capital inflows, RBI support

The Indian Rupee (INR) strengthened against the US Dollar (USD) on Monday, marking a second consecutive day of growth. This positive movement was driven by strong capital inflows and support from the Reserve Bank of India (RBI). However, traders remained cautious due to fluctuating oil prices and potential interventions by the RBI to maintain stability.

The Rupee's resilience was tested as crude oil prices surged due to expectations of stricter sanctions on Iran from US Treasury Secretary Scott Bessent, which could disrupt global energy markets. Nevertheless, the RBI's aggressive interventions and a record-high foreign exchange reserve helped cushion the Rupee against further depreciation.

Indian equities showed resilience, opening slightly higher despite a week of losses attributed to rising crude prices and bond yields. Analysts from MUFG/BTMU predicted the RBI would pivot towards rate hikes in the coming months, removing the current accommodative tone. Meanwhile, USD/INR hovered around 95.70, maintaining a mild bullish bias as long as it stays above key technical levels such as the nine-period and 50-period Exponential Moving Averages (EMAs).