The rupee has gained around 0.9% so far this week and is on track for its strongest weekly performance in four months. The currency has remained supported after the RBI stepped in aggressively last Friday (July 24) and continued to provide support through dollar sales.
Market participants said the central bank’s recent actions signal that it is looking to prevent a sharp depreciation in the rupee from current levels.
A private sector bank trader said the RBI’s dollar sales near the ₹95.75 per dollar level on Thursday indicated its intent to limit further weakness in the currency.
RBI intervention supports rupee
The rupee has outperformed other Asian currencies that are sensitive to oil prices, including the Indonesian rupiah and Philippine peso, this week, largely due to the RBI’s market intervention.
While RBI support has improved the near-term outlook for the currency, analysts said further appreciation could remain limited unless risks from crude oil prices ease.
India remains vulnerable to higher oil prices as it imports a large share of its crude requirements. Any sustained rise in global crude prices can increase demand for dollars and weigh on the rupee.
Dollar weakness, oil movement in focus
The rupee has also benefited from a sharp fall in the US dollar, which is facing pressure after concerns over possible currency intervention in Japan and shifts in expectations around US monetary policy.
The dollar weakened after comments from Federal Reserve Chair Kevin Warsh raised concerns about the US central bank’s approach towards inflation and interest rates.
Meanwhile, crude oil prices extended their decline in Asian trading as investors assessed developments around a Saudi Arabia-led maritime coalition aimed at improving security cooperation in the Red Sea.
However, oil markets remain volatile amid renewed tensions between the US and Iran, keeping a key risk factor for the rupee outlook.
-With Reuters inputs
