Rupee Recovers Sharply Against Dollar Amid RBI Support

The Indian rupee advanced to its strongest level in nearly a week on May 23, supported by central bank intervention and interbank dollar selling after the currency came under heavy pressure in recent weeks due to elevated crude oil prices and foreign capital outflows.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The rupee was trading at 95.8650 against the U.S. dollar, gaining 0.2% from its previous close. The move followed Thursday’s 0.6% recovery, when the domestic currency had also strengthened after likely intervention by the Reserve Bank of India (RBI).

The latest rebound comes after the rupee touched multiple record lows over the past few sessions. Since late February, the currency has weakened nearly 6% against the dollar amid rising geopolitical tensions in West Asia and higher energy prices.

India imports close to 90% of its crude oil requirements, making the rupee particularly vulnerable to prolonged increases in global oil prices.

Oil Prices Stay a Key Risk

Brent crude prices have continued to trade above $100 per barrel on supply fears over the Iran conflict and uncertainty over shipping routes through the Strait of Hormuz.

Currency markets continue to monitor geopolitical developments closely after the U.S. and Iran maintained differing positions on Tehran’s uranium stockpile and shipping controls in the region.

U.S. Secretary of State Marco Rubio said there had been “some good signs” in discussions with Iran, while U.S. President Donald Trump stated that military strikes could resume if negotiations fail to progress.

Barclays said in a note that Asian currencies may continue to remain under pressure unless crude oil prices decline materially and shipping routes normalise.

The brokerage added that it continues to expect further weakness in the rupee and sees the USD/INR pair moving towards the 98 level over the coming weeks, though at a slower pace compared to the recent depreciation trend.

RBI Transfer In Focus

Apart from currency intervention, market participants are also tracking the expected transfer of surplus funds by the RBI to the central government.

According to a Reuters poll, the central bank’s dividend payout is estimated to be between ₹2.9 lakh crore and ₹3.2 lakh crore.

The transfer is expected to provide additional fiscal support to the government at a time when global commodity prices and imported inflation risks remain elevated.

Most Asian currencies traded weaker during the session even as the rupee outperformed regional peers due to central bank action.

The recent recovery in the rupee has helped ease some immediate pressure in currency markets, although investors remain cautious given ongoing volatility in crude oil prices and uncertainty surrounding geopolitical developments in West Asia.