Indian rupee ends flat after hitting two-week low, oil and RBI remain key

Mumbai witnessed the Indian rupee stabilize after dropping to its weakest level in two weeks, ending nearly unchanged on Thursday. The rupee closed at 95.26 against the dollar, mirroring the previous day's close at 95.22. Earlier, it had plummeted to its lowest point since October 12, driven by heightened dollar demand at the Reserve Bank of India's reference rate and increased interbank activity to take on short rupee positions.

However, the Reserve Bank of India's potential intervention likely prevented further losses, while fading demand toward the session's end allowed the rupee to recover. Softer oil prices, buoyed by optimism about peace talks and reduced concerns over Middle East supply disruptions, also contributed to the rupee's stability. US Vice President JD Vance attempted to restart peace negotiations by sending a letter to Iranian Security Council chief Mohsen Rezaei, according to the Wall Street Journal.

The rupee's stability positively impacted Indian equities and bonds, with the benchmark Nifty 50 surging by around 1%. Meanwhile, the 10-year benchmark bond yield eased by 8 basis points to 7.35%. Conversely, shares in Asia traded erratically as AI-related earnings announcements yielded mixed results, intensifying the importance of Amazon and Intel's forthcoming results.

As traders focused on the release of US personal consumption expenditure inflation data, expectations were set for a 0.3% month-over-month increase, aligning with market forecasts. This data would provide insights into the future trajectory of interest rates, with ING predicting a potential modest positive reaction in the dollar following the release.