RBI backstop keeps Indian rupee stable, blunting importer dollar demand impact

According to Business Recorder, the Indian rupee ended almost unchanged on Wednesday at 94.97 against the US dollar, up from Tuesday's settlement of 94.95. The currency traded within a narrow band as Reserve Bank of India support offset stronger dollar demand from importers. Traders said the central bank likely sold dollars before the market opened and stayed active to limit sharp swings.

Oil and bond markets added pressure on the currency. A renewed military flare-up involving the United States and Iran pushed Brent crude to a peak of $97 per barrel, while worries about inflation drove American Treasury yields higher, with the 10-year note reaching its loftiest level in nearly three years. Market participants had anticipated the news would weigh on the rupee, yet RBI action limited any sharp fall.

Deposits from non-residents under the FCNR scheme have given the RBI firepower, and State Street Investment Management economist Krishna Bhimavarapu said the inflows may eventually have exceeded $100 billion. Across the last two sessions, RBI dollar sales and foreign bank inflows lifted the rupee despite those headwinds.