Indian rupee strengthens on firm central bank intervention, oil retreat
MUMBAI: The Indian rupee strengthened modestly on Friday, aided by firm central bank intervention early in the trading session and lower oil prices after US President Donald Trump said he would not attack Iran before next month’s US elections. Brent crude oil prices declined about 1.5%, helping the rupee rise to 96.61 per dollar, up 0.2% on the day. The currency faced pressure in early trading,…
Mumbai witnessed a modest strengthening of the Indian rupee on Friday, according to wire material. The central bank's strong intervention early in the trading session was the primary driving force behind the currency's uplift, followed by the decline in oil prices. Brent crude oil prices dropped by approximately 1.5%, contributing to the rupee's rise to 96.61 per dollar, marking a 0.2% gain for the day.
Although the currency faced early trading pressure, traders believed the central bank intervened close to the 96.80 mark. The Indian rupee has been consistently supported by the central bank's interventions to evade testing its record low of 96.96, which was recorded in May. Persistent challenges for the South Asian currency, ranked as the second-worst performer in the region this year, stem from ongoing concerns about the Iran war, which continue to pose economic headwinds and negatively impact hedging and portfolio flows.
According to two traders, the central bank's intervention was "slightly heavier than in recent sessions," with the probable aim of countering expectations of ongoing depreciation. ANZ, in a recent note, stated that the Indian rupee's most favorable trajectory would be a steady and orderly depreciation, avoiding both the encouragement of speculative spirals and maintaining an overly strict exchange rate while mitigating concerns about imported inflation.
Earlier in the week, the Reserve Bank of India (RBI) increased interest rates for the first time since February 2023 and indicated more hikes were on the horizon. Traders and analysts, however, emphasized that the currency would have reaped greater benefits from more robust language from the central bank regarding future rate hikes and the rupee.
In addition, the dollar index experienced a slight retreat, aligning with US bond yields. Regional stocks and currencies exhibited strength, while markets in South Korea and Taiwan, considered as key indicators for AI sentiment, were closed for local holidays.
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