Rupee dips on week as oil pangs linger, intervention prevents fall past 96/USD

The Indian rupee was little changed on Friday but fell for the week as oil prices rose for a second straight week on concerns about supply disruptions from the Iran war. Frequent Reserve Bank of India intervention limited losses and kept the rupee stronger than the psychologically key level of ‌96 per ⁠dollar. It ⁠closed at 95.69 on Friday, nearly flat on the day and down 0.3% for the week.

Sustained central bank presence across market segments has subdued moves in the rupee and ​driven its 2-week realised volatility to under 2%, among the lowest in Asian peers.

Bankers and analysts say that the central bank's ammunition to fight rupee depreciation has been bolstered by over $50 billion worth of ⁠inflows under ‌measures announced in June to strengthen India's balance of payments.


"With the RBI expecting at least US$80bn from its foreign currency mobilisation ⁠measures, the external buffer should remain supportive of the INR," MUFG said in a note.

"However, the record forward ​position and associated liquidity management suggest that the RBI will continue to prioritise orderly currency movements rather than outright appreciation."

The central bank's net forward dollar liabilities stood at $103.3 billion at the end of June. "The net forward position that we have right now is very manageable," RBI Governor Sanjay Malhotra said ‌in a media interview earlier this week.

Meanwhile, traders also continue to take cues from moves in oil prices with Brent ​crude oil ​future on track ⁠for a over 5% weekly gain and last at $92.9 per barrel.

A broadly weaker dollar helped boost most Asian currencies on Friday but was of little help ​to the rupee.

The currency's response to global cues has become muted since it did not weaken in an adverse set up so there is little appetite for gains when condition improve and importer demand picks up instead, an FX salesperson at a foreign bank said.