The Indian rupee concluded Wednesday’s trading session without significant change, thanks to the potential U.S. dollar sales by the Reserve Bank of India (RBI), which helped shield the local currency from touching its all-time low. This support counterbalanced the pressures exerted by surging crude oil prices and outflows related to the equity market.
The rupee settled at a stable rate of 83.2575 against the U.S. dollar after fluctuating within a narrow range of 83.23 to 83.27. While several Asian currencies saw gains attributed to the offshore Chinese yuan’s strength, the rupee exhibited another subdued performance. Traders believe the RBI intervened by selling U.S. dollars during the latter part of the session to prevent the rupee from touching its lowest-ever point. The rupee had recorded its lifetime low at 83.29 back in October 2022.
The dynamics of the global oil market played a role in this scenario, as Brent crude oil futures experienced a nearly 3% rise, reaching $92.58 per barrel. The dollar index remained relatively steady at 106.205.
Additionally, equity-related outflows contributed to the rupee’s challenges during the session. As of October’s commencement, foreign investors had divested $1.17 billion worth of Indian equities.
Financial analysts anticipate the rupee to trade within a range until the upcoming Monday. This outlook arises from the market’s anticipation of the maturity of a $5 billion forex swap initiated by the RBI in April 2022, which has the potential to generate a U.S. dollar shortage.
Notably, major Indian banks have been accumulating dollars through USD/INR buy/sell swaps, which grant them immediate access to dollars for the duration of the contract. These developments are set to keep the currency market on its toes in the coming days as it navigates multiple influencing factors.