Interventions hold rupee on narrow leash, traders await US sanctions on Iran

The Indian rupee tip-toed through another lacklustre trading session on Monday as persistent central bank intervention kept the currency trapped in a thin band while investors awaited details of threatened U.S. sanctions on Iran.

The rupee closed out the session at 95.7450 per dollar, moving inside a range of about 10 paisa through ‌the session.

State-run ⁠banks were ⁠spotted offering dollars, most likely on behalf of the Reserve Bank of India, traders said. Such interventions over the last two weeks have driven the rupee's near-tenor volatility to among the lowest for Asian currencies.


The currency's 2-week realised volatility has declined below 2% while the 1-month implied volatility, a gauge of future expectations, has ​eased to about 4%, below its year-to-date average ⁠of 5.2%.

"It ‌appears that the central bank wants to deter any ​appetite to bet ​against the rupee but whether that is happening will ⁠be clear only when intervention recedes," a trader at ​a Singapore based hedge fund said.

The traders expects the rupee to hover between 95.50 and 96.50 in the near-term, with a sustained fall in oil prices seen as key for a meaningful recovery.

Ongoing conflict in the Middle East has kept investors uncertain about when supplies from the key producing region could revive to pre-Iran war levels.

"We now forecast a ‌more drawn-out Middle East supply recovery, which leaves the market in a deficit throughout 4Q (2026) and 1Q. With that, we revise our Brent forecasts higher, peaking at $100/b ⁠in 4Q," analysts at Morgan Stanley said in a note.

India imports nearly 90% of its crude requirements, making it one of the world's most vulnerable ​economies to the Middle East oil shock.

Elsewhere, the dollar index firmed 0.2% to 99 while most Asian currencies and regional stock indexes fell. India's benchmark Nifty 50 was down about 0.3%, faring better than the 1.5% drop in MSCI's gauge of regional stocks outside of Japan.