The Indian rupee is expected to stay within a narrow trading band as the Reserve Bank of India intervenes to offset persistent dollar demand, despite rising oil prices and global trade tensions influencing market dynamics.
The Indian rupee is set to begin Thursday little changed to slightly weaker and is likely to stay trapped in a tight trading band as persistent dollar buying from hedgers offsets the Reserve Bank of India’s attempts to curb losses, traders said. Dealers expect the currency to open around 95.34 to 95.38 per dollar after ending Wednesday at 95.33, with the central bank’s steady dollar sales through state-run banks keeping downside pressure contained. Sources in the market said the RBI’s near-constant presence has reduced the impact of moves in oil prices and the broader dollar, even as heavy demand for the U.S. currency remains difficult to absorb.
Wednesday’s session was marked by unusually subdued price action, with the rupee moving within a narrow 3-4 paise range for much of the day before a late recovery driven by further dollar selling by the RBI. The currency has barely moved this week, and traders say near-term volatility has dropped sharply, underscoring how firmly the central bank is managing the market. One currency trader told the newspaper that the RBI appears intent on pressing the dollar-rupee rate lower, but that elevated crude prices continue to fuel intense demand for dollars at current levels.
Oil remains an important backdrop. Brent crude briefly climbed above $90 a barrel on Wednesday before easing back, and AP reported that energy markets remain unsettled by tensions in the Middle East and by concerns over the flow of crude through the Strait of Hormuz. At the same time, the market has been encouraged by signs that the Federal Reserve may not need to raise interest rates next month, after July U.S. inflation data came in broadly as expected. That has slightly reduced the odds of a Fed hike in money markets, offering some relief to Asian currencies, including the rupee.
Still, the broader picture suggests a currency being held in a narrow corridor by policy intervention rather than market conviction. CARE Ratings said in a recent note that the rupee faces near-term pressure from U.S. policy and global trade tensions, but expects it to remain steady by the end of fiscal 2026, supported by a manageable current account deficit and balance of payments surplus. For now, though, traders say the immediate story is simpler: the RBI is leaning against weakness, oil is expensive enough to keep dollar demand strong and the rupee is stuck in the middle.
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