Indian rupee soothed by intervention, surge in forward premiums tipped to cool

Business Recorder reported that the Indian rupee ended Friday marginally firmer at 95.8125 per dollar, up from 95.9550 in the prior session. The currency was roughly flat for the week despite a strong rally in both oil and the dollar that had put heavy pressure on it. Repeated central bank intervention was the main reason losses stayed limited.

Oil prices slipped about 2% on Friday but remained above $100 per barrel, as investors weighed Houthi attacks on Saudi Arabia against the chance of a truce between the United States and Iran. Higher energy costs have also pushed up global bond yields, with investors betting that central banks will have to lift borrowing costs to fight inflation. ING analysts said markets were not yet pricing in relief for oil, which keeps the risk of higher rates.

The central bank's sell-buy swaps, which drain excess rupee liquidity from banks, helped lift dollar-rupee forward premiums this week, according to a swap trader. The one-year forward yield climbed by up to 28 basis points over three sessions, reaching 3.50% on Friday, the highest since May. A second swap trader said moves of this kind generally fade once market positioning lightens, though worldwide risks could keep positions cautious for a while.