Interventions hold Indian rupee on narrow leash, traders await US sanctions on Iran

Business Recorder reported that the Indian rupee made little progress on Monday, finishing the session at 95.7450 per dollar within a band of roughly 10 paisa. The currency stayed contained as state-run banks were seen selling dollars, a move traders believed was carried out for the Reserve Bank of India. Over the past fortnight these operations pushed the rupee's short-dated volatility down to one of the lowest levels in Asia.

Realised volatility over two weeks has fallen below 2%, while one-month implied volatility, a measure of expectations, has come down to roughly 4%, under the year-to-date average of 5.2%. A Singapore-based hedge fund trader cautioned that the central bank appears keen to discourage bets against the rupee, and only a pullback in intervention will show whether that is working.

Near-term expectations point to a 95.50 to 96.50 corridor, with a lasting decline in crude prices viewed as the critical factor for any real rebound. Morgan Stanley analysts said in a note that Middle East supply may take longer to recover, leaving the oil market in deficit through 4Q (2026) and 1Q, and they lifted their Brent forecast to a peak of $100/b in 4Q. Elsewhere, the dollar index rose 0.2% to 99, while Nifty 50 slipped about 0.3% and MSCI's regional gauge outside Japan fell 1.5%.