Rupee clings to two-week high as oil slides, intervention helps cement rise

The Indian rupee strengthened on Tuesday to close at its strongest level in two weeks as a sharp retreat in oil prices and likely central bank intervention helped the currency cement its bounceback from near record low levels.

Brent crude oil prices fell 3% to $85.6 per barrel, their lowest in over ‌a week, ⁠which helped ⁠lift the rupee to 95.8525 per dollar, up 0.1% from its previous close. The local currency hit a record low of 96.96 on May 20.

State-run banks were spotted selling dollars on the day, most likely on behalf of the Reserve Bank of India, traders said.


The RBI has intervened in every trading session ​since Friday, stepping up defense of the currency, ⁠which traders ‌are reading as a sign of lower tolerance for ​rupee weakness.

The ​RBI's stepped-up intervention also comes against the backdrop of ⁠higher-than-expected inflows - about $40 billion since early June - spurred by ​a series of measures unveiled last month.

The central bank ​seems to be laying down a "soft line in the sand," for the rupee, a trader at a state-run bank said. At the same time, if crude prices move sharply higher again, the pressure could rebound, the trader added.

Growing hopes for a resolution to the U.S.-Iran conflict have ‌pulled oil prices about 15% lower from the peak hit last week, but traders are wary of a quick turn, ​as seen ​on multiple occasions ⁠over the course of the Iran war which started in late February.

Meanwhile, global stocks fell as investors dumped chipmakers on concerns about Chinese competition and ​funding of the AI boom with rising odds of a Federal Reserve rate hike also dampening the mood.

Interest rate futures are pricing a one-in-three chance of a rate hike by the Fed on Wednesday. The dollar index was a tad higher on the day at 101.6.