Central bank measures, intervention spark Indian rupee's sharpest rally in six months
MUMBAI: The Indian rupee rose about 1% on Monday after the central bank took steps to temper dollar demand in spot and derivatives markets, with likely intervention through dollar sales adding to the gains. The Indian rupee rose 1% to 95.77 per dollar from 96.73 on Friday, outperforming mostly rangebound Asian peers and posting its best single day gain since April, which had also been sparked a…
The Indian rupee experienced its strongest single-day gain in six months, surging approximately 1% on Monday, to 95.77 per dollar from 96.73 on Friday. The central bank's intervention in the spot and derivatives markets, which may have included dollar sales by state-run banks, appears to have contributed to the currency's rally.
This marked a notable improvement from the previous week, when the rupee had hovered near a record low of 96.96 per dollar. The recent measures were implemented following India's announcement of new steps aimed at stabilizing the currency, which had been under pressure due to a surge in import-related dollar demand and persistent capital outflows.
The oil window, which redirecting oil companies' dollar purchases away from the spot market and tightening hedging rules, is expected to remove around $10-12 billion of monthly dollar demand from the spot market. Despite the rupee's impressive rally, analysts caution that its resilience will depend on whether broader balance of payments pressures ease.
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