The Indian rupee remained close to its recent lows on Monday, with market dynamics influenced by rising oil prices and increased central bank support, signalling a potential shift in traders’ behaviour amid currency interventions.
The Indian rupee held near recent lows on Monday as higher oil prices and signs of central bank support pulled in opposite directions, with traders saying the Reserve Bank of India’s presence in the market was making it harder to build fresh bets against the currency. The rupee finished at 95.30 per dollar, slightly weaker than 95.2075 in the previous session, after state-run banks were seen selling dollars through much of the day, according to traders in Mumbai.
Oil-linked pressure has been a major theme for the rupee because of concern about the Strait of Hormuz, a vital shipping route for crude. Reuters reported that talks to reopen the waterway were slowed by Iran’s demand that the United States meet several conditions, helping keep energy markets unsettled. Finimize said the currency had slipped to a one-month low as oil jumped, while The Straits Times reported that RBI intervention through state banks helped prevent a deeper sell-off.
Market participants said the central bank’s repeated defence of the currency has started to change behaviour among speculators, with one private-bank trader telling Reuters that the 96 level was becoming a clear line in the sand. ING said it remained constructive on the rupee, citing policy steps designed to attract dollar inflows, and projected gains towards 94.50 in three months and 94 in six months.
Elsewhere in Asia, currency moves were mixed, with the Indonesian rupiah firmer and the South Korean won weaker. Indian shares were little changed. The focus now turns to inflation readings from India and the United States, which could influence the path of borrowing costs. Reuters noted that a poll of 40 economists expects India’s consumer inflation to rise to 4.50% in July from 4.38% in June.
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