Rupee ends higher, Middle East conflict to keep RBI support in play

The Indian rupee logged its biggest one-day gain in a month on Thursday after the Reserve Bank of India stepped in aggressively to shore up the currency, with bankers expecting the central bank to stay on guard as geopolitical risks persist.

The ‌rupee touched ⁠a peak ⁠of 91.4125 in before ending the day at 91.60 per dollar, up ​0.6% on the day.

India's benchmark indexes rose 1% and most Asian stocks ​were also higher while currencies traded mixed.


Traders pointed to aggressive dollar sales by state-run banks, which lifted the rupee after it fell ​to a record low of 92.3025 on ⁠Wednesday.

Choppy moves ‌in oil prices also steered the rupee on Thursday, with traders focused on developments in the ongoing conflict between ⁠U.S.-Israel and Iran.

The war entered its sixth day ​on Thursday, with Israel launching a wave of ​missiles on Tehran after Iranian missiles sent millions of Israelis into bomb shelters.

While risk-on trading was seen on news headlines suggesting the conflict may be shorter than feared, uncertainty remains and is expected to keep the rupee under pressure.

"We anticipate continued ‌depreciation pressure on the INR ... The Reserve Bank of India (RBI) is expected to intervene to mitigate excessive volatility ​and sterilize ​these actions to maintain ⁠INR surplus liquidity within the system," said Sameer Karyatt, head of trading at DBS Bank India.

The dollar index was a tad higher ​at 98.9, while Brent crude oil prices rose nearly 2% to nearly $83 per barrel.

"A prolonged conflict would increase downside risks for the global economy and the risk of a more persistent inflation shock," MUFG said in a note.