Rupee Holds Near Previous Close Against Dollar as RBI Likely Steps In

The Indian rupee traded almost flat against the U.S. dollar on Friday after likely intervention by the Reserve Bank of India (RBI) helped cushion the currency from weakness triggered by a sharp rise in the global crude price. According to Reuters, the central bank is believed to have entered the foreign exchange market shortly after domestic trading began.

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The rupee was expected to open weaker in the 95.35-95.40 per U.S. dollar range as higher oil prices weighed on sentiment. However, intervention around the opening of the spot market at 9:00 a.m. IST supported the domestic currency. The rupee was last quoted at 95.2650 against the dollar, little changed from the previous session, according to Reuters.

Higher Crude Price Pressures the Rupee

The latest move in the rupee came as the global crude price advanced following concerns over a possible escalation of tensions in the Middle East. Brent crude futures were trading about 1.3% higher at $83.6 per barrel during the session.

For India, which relies heavily on imported crude oil, sustained gains in the crude price can increase the country’s import bill and raise demand for U.S. dollars from oil marketing companies. A higher demand for dollars typically exerts pressure on the domestic currency.

RBI Intervention Helps Stabilise the Currency

According to Reuters, three foreign exchange traders indicated that the RBI likely intervened in the currency market to limit volatility. While the central bank does not routinely disclose its market operations in real time, it has historically stepped in to smooth excessive fluctuations in the rupee rather than defend any specific exchange rate.

The intervention appeared to prevent the rupee from extending its expected opening losses, allowing it to trade close to the previous day’s closing level despite a stronger U.S. dollar demand linked to higher energy prices.

Global Developments Remain in Focus

Currency markets continue to track geopolitical developments alongside movements in the crude price, as energy costs have a direct bearing on India’s external trade balance. Prolonged increase in the oil prices would definitely have an impact on inflation, costs of imports and foreign exchange needs.

Traders are watching the global risk sentiments and monetary policies for further cues. Although the rupee did not fluctuate much on Friday, its future movement could depend on how things develop in the international oil market and the price trend of crude, along with capital flows.