The Reserve Bank of India (RBI) likely intervened in the foreign exchange market on Tuesday to protect the rupee from pressure caused by elevated oil prices and sustained corporate demand for dollars, four traders told Reuters. State-run banks were seen offering dollars, which traders said was most likely on behalf of the RBI, according to a report by Business-Today.
Rupee opens lower, stays range-bound
The rupee was little changed at 95.7350 per dollar, holding within a trading range of less than one paisa as the central bank's intervention kept volatility subdued, the report said. The currency opened at 95.74 per dollar, down 4 paise from Monday's close, after settling 1 paisa higher at 95.70 on Monday, according to the report.
Forex traders told news agency PTI that elevated crude prices and importer demand for dollars were weighing on the currency, while RBI intervention through state-run banks helped prevent a sharper decline. The rupee has remained range-bound for about two weeks, with oil companies and the RBI buying dollars at the lower end of the range and the central bank selling dollars around the 95.75 level, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
"Overall, the rupee remains firmly range-bound around Rs 95.50–96.00, with oil prices and RBI intervention likely to remain the key near-term drivers," Bhansali said, according to PTI.
Oil, dollar index and equity markets
Brent crude, the global oil benchmark, was trading 0.30% higher at $92.45 a barrel in futures trade, according to PTI. The dollar index, which measures the US currency against a basket of six major currencies, was at 99.04, up 0.04%, supported by safe-haven demand following the US escalation of sanctions on Iran, according to PTI. The rupee has also faced pressure from renewed geopolitical uncertainty around Iran and weakness in Asian equities, the report said.
India's domestic equity markets opened lower on Tuesday. The Sensex fell 30 points to 77,336.32, while the Nifty declined 38.80 points to 24,179.50 in early trade, according to the report. Foreign institutional investors, however, bought Indian equities worth Rs 1,181.66 crore on a net basis on Monday, it added.
| Indicator | Reading | Movement |
|---|---|---|
| USD/INR (intraday) | 95.7350 | Little changed, range <1 paisa |
| USD/INR open | 95.74 | -4 paise vs Monday close |
| USD/INR Monday close | 95.70 | +1 paisa |
| Brent crude futures | $92.45/barrel | +0.30% |
| Dollar index | 99.04 | +0.04% |
| Sensex | 77,336.32 | -30 points |
| Nifty | 24,179.50 | -38.80 points |
| FII net equity purchase | Rs 1,181.66 crore | Monday |
| RBI swap facility inflows | $73 billion | As of Aug 21 |
Dollar swap facility lifts forex inflows
Separately, the RBI's special USD-INR forex swap facility for FCNR(B) deposits, overseas foreign currency borrowings and external commercial borrowings had mobilised $73 billion in foreign exchange inflows as of August 21, the report said. The inflows reflected strong participation from non-resident Indians, it added.
For corporate treasurers and trade finance desks, the RBI's sustained intervention has kept the currency anchored in a tight range despite global market volatility, with the reported 95.50–96.00 band defining near-term expectations. The $73 billion mobilised through the swap facility adds to the country's foreign exchange buffer, while elevated Brent crude at $92.45 continues to pressure the rupee through higher import costs and oil-company dollar demand, according to the report.
Sources:
