Rupee Steady on RBI Support, Importer Demand

The Indian rupee hovered around 95.5 per dollar, mostly trading in a tight range for the whole week as persistent Reserve Bank of India intervention and steady importer dollar demand kept the currency anchored. The rupee traded between 95.40 and 95.75 this week, as importer demand supported the lower end while RBI intervention limited downside. Oil prices near $90 a barrel have also been largely absorbed by the market, while the dollar remained steady near a one-week high ahead of Fed Chair Kevin Warsh’s closely watched Jackson Hole speech. Meanwhile, the RBI gave banks greater flexibility to swap dollars raised through FCNR(B) deposits, allowing transactions above $100 million outside their designated weekly window to manage a surge in dollar liquidity. The special deposit scheme has attracted more than $65 billion ahead of its August 31 deadline, strengthening the RBI’s ability to manage rupee volatility.

The Indian rupee steadied to around 95.4 per dollar, hovering near two-week highs after the holiday break as lower oil prices and sustained Reserve Bank of India intervention offset expectations of a Federal Reserve rate hike next month and persistent dollar demand for hedging. The rupee had settled 0.35% higher on Tuesday before FX and money markets closed for a holiday on Wednesday. Brent crude extended its decline to around $87.30 a barrel, while the RBI has intervened almost daily over the past two weeks, particularly when USD/INR moved toward the 95.60-95.80 range, limiting gains in the dollar. Meanwhile, the dollar index held near an eight-day high after US inflation data revived expectations of a September Fed rate hike, with markets awaiting Fed Chair Kevin Warsh's speech at Jackson Hole for further clues on the interest-rate outlook. Persistent importer dollar demand is also expected to limit further downside in USD/INR.

The Indian rupee hovered near 95.4 per dollar, with gains limited by steady corporate dollar demand, derivative contract maturities, and elevated oil prices, while expectations of continued RBI intervention helped keep the currency range-bound. Foreign portfolio inflows offered some support, with overseas investors purchasing more than $2.5 billion of Indian equities in August, extending a shift from nearly $28 billion of outflows over the previous four months. Meanwhile, the dollar remained close to three-month lows despite some safe-haven demand after the US expanded sanctions against Iran, while plans to increase buybacks of longer-dated Treasuries helped contain upward pressure on US borrowing costs. Against this backdrop, the rupee has stayed within a narrow 95.45-95.75 range over the past two weeks. Both the FX and debt markets will be closed on Wednesday in observance of Eid-e-Milad, with trading resuming on Thursday.