MUMBAI, Aug 17: The Indian rupee came under renewed pressure on Monday as rising crude oil prices and geopolitical uncertainty weighed on investor sentiment, with traders saying the Reserve Bank of India may have intervened to prevent a sharper decline.
The rupee slipped to around 95.49 against the US dollar in early trading before recovering some ground following dollar sales by state-run banks, which market participants believe were carried out on behalf of the central bank.
The currency had closed at 95.4250 against the dollar on Friday. Traders said the RBI has remained active in the foreign exchange market over the past week as it seeks to manage volatility and prevent excessive fluctuations.
A key concern for the domestic currency is the rise in international crude prices. Brent crude was trading around $88.8 a barrel, adding pressure to India’s import costs and increasing demand for dollars from oil companies.
Market participants are also watching developments around the Middle East, particularly disruptions and risks linked to the Strait of Hormuz. Any prolonged disturbance to oil shipments could further increase energy costs for major importing economies such as India.
Separately, the RBI has shortened the deadline for banks to access a discounted foreign-exchange swap facility linked to foreign-currency non-resident deposits. The deadline has been brought forward to August 31 from September 30.
India’s foreign exchange reserves have risen to around $707 billion, providing the central bank with a substantial buffer to manage external pressures.
Analysts expect the rupee to remain sensitive to crude prices, global risk sentiment, foreign fund flows and developments in US monetary policy in the coming sessions.