Indian Rupee Steadies Near Record Low

The Indian rupee hovered around 95.4 per dollar, edging higher after steadying in the previous session as a pullback in oil prices offered some relief. Brent crude fell more than 2% on Thursday to around $86.50 a barrel, despite a US threat to maintain a naval blockade of Iranian ports indefinitely. However, persistent dollar demand from importers and maturities in the non-deliverable forward market continued to weigh on the rupee, while near-daily intervention by the Reserve Bank of India helped cushion its decline. Meanwhile, market participants assessed the RBI's proposed loan interest-rate framework, which could provide longer-term support by strengthening monetary-policy transmission and improving pricing transparency. The rules would link floating-rate personal and MSME loans to external benchmarks, including the RBI's repo rate, but would take effect only from April 2027 if finalized.

The Indian rupee hovered around 95.42 per dollar, edging lower after briefly stabilizing in the previous session as higher oil prices and persistent dollar demand weighed on the currency. Brent crude rose 5% on Monday, moving closer to $88 a barrel, as uncertainty over a US-Iran peace deal reduced hopes of an agreement to reopen the Strait of Hormuz. The latest setback came after US President Donald Trump rejected Iran’s demands for compensation and instead called for Tehran to compensate for deaths linked to past conflicts and attacks. Domestically, strong dollar demand from importers and hedging activity continued to weigh on the currency. The Reserve Bank of India likely continued intervening in the foreign exchange market, with state-run banks seen selling dollars on its behalf, helping absorb some of the demand and limiting the rupee's decline. Meanwhile, the rebound in oil prices pushed the US 10-year Treasury yield to around 4.70%, providing additional support to the dollar.

The Indian rupee fell to around 95.25 per dollar, retreating from four-week highs as a rebound in oil prices revived concerns over India's import bill and inflation outlook. Brent crude rebounded above $83 a barrel, extending gains for a third straight session after rising about 4% on Thursday. The move followed a proposal by Iran and Oman to restrict vessels deemed hostile, stoking fears over supply disruptions. Investors also turned cautious ahead of the US July nonfarm payrolls report, with economists expecting 80,000 jobs to have been added after 57,000 in June and the unemployment rate to remain at 4.2%, as the data could influence expectations for further Federal Reserve rate hikes. Meanwhile, traders monitored the Reserve Bank of India, whose recent dollar sales had helped lift the rupee to a one-month high, though persistent underlying demand for dollars suggested the currency's near-term direction would continue to depend on the extent of RBI support.