Indian central bank likely intervenes to defend rupee as oil prices climb, traders say

Traders at three banks and one foreign exchange brokerage told Reuters that the Reserve Bank of India most likely intervened in currency markets on Friday to cap the rupee's slide. The currency dropped as much as 0.4% to 95.7925 per dollar before recovering some ground and last trading at 95.71. Pressure came from a sharp rise in oil prices and higher U.S. bond yields.

State-run lenders were seen offering dollars, which traders believed was being done on behalf of the central bank. Brent crude rose to almost $110 a barrel in Asian trade as concern grew over the widening conflict in the Middle East. Investor anxiety about that conflict added to the strain on the rupee.

On the same day, the RBI likely carried out dollar-rupee sell/buy swaps for a third consecutive session to pull surplus rupee liquidity out of the banking system. A Mumbai-based bank trader described the swaps as modest and mostly up to six months in maturity. After weak demand at its longer-dated rupee withdrawal auctions earlier in the day, the central bank also announced a shorter-duration auction.