RBI's bid to lift Indian rupee put to test by oil, US yields

Business Recorder reported that the Indian rupee is likely to open lower on Wednesday, with traders expecting a range of 95.02 to 95.06 against the dollar. The currency had settled at 94.95 on Tuesday, extending a three-day winning run that briefly took it to a two-month peak of 94.80.

The gains have been driven mainly by heavy RBI intervention, along with dollar sales from foreign banks, and the rupee has outperformed several regional peers recently. A currency trader said the open question is whether the central bank will intervene again to offset higher crude prices, adding that the RBI is presently the sole substantial dollar seller and that the rupee would struggle to hold current levels without it.

Support is also coming from non-resident Indian deposits, with FCNR(B) inflows exceeding $100 billion before the August 31 deadline for banks, according to the Financial Express. Oil is adding pressure, with Brent futures reaching $95.50 per barrel after renewed US-Iran hostilities overnight, while US Treasury yields climbed to their loftiest levels since late 2023.