Rupee sails past 95 to one-month high, premiums drop before RBI decision

The Indian rupee rose to its highest level in a month on Wednesday, buoyed by lower oil prices and a weaker dollar, while forward premiums dropped ahead of the Reserve Bank of India's policy decision.

The currency opened 0.5% higher at 94.92 per U.S. ‌dollar, its ⁠highest level ⁠since July 1, and has been moving in the 94.92-95.02 range in ​early trade.

The Brent crude oil benchmark tumbled 5.2% on Tuesday, extending losses by another 1% in Asian trade amid comments from Qatari and U.S. officials that fuelled hopes of a diplomatic resolution to the months-long Iran conflict.


The latest decline ⁠in crude ‌oil prices reinforced the rupee's positive bias, which ​has ​been building over recent sessions. Despite the recent ⁠momentum, traders said the break past the 95-per-dollar ​mark came as a surprise.

"I hadn't expected the ​95 level to give way," a currency trader at a private-sector bank said.

"It appears the underlying trend has become so supportive that positive developments are having a bigger impact (on lifting the rupee) than they normally would."

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The decline in oil ‌prices comes ahead of the Reserve Bank of India's policy decision due shortly, where it is widely ​expected to ​leave interest rates ⁠unchanged.

Traders expect the policy outcome to have only a limited impact on the rupee, with oil prices, the dollar and RBI FX ​intervention seen as dominant drivers of the currency in the near-term.

Dollar/rupee forward premiums eased ahead of the policy decision, largely tracking the move in the spot market. The one-year implied yield fell 4 basis points to 2.82%.