Rupee reaches one-month high after wider RBI curbs and intervention

what happened

The Indian rupee rose to a one-month high on Tuesday as new central-bank measures eased pressure on the currency and likely spot-market intervention strengthened their effect, Newsmetry API reported. The rupee reached 95.0725 per dollar in early trading, its strongest level since early September, before trimming the advance to 0.5% at 95.25 per dollar.

On Monday, the Reserve Bank of India extended a recent cash-deposit requirement for foreign-exchange hedges to every bank transaction, including hedging of lenders’ assets and liabilities. The move followed several steps introduced since Saturday to support the rupee, which last week tested record lows amid high oil prices and capital outflows.

The latest adjustment confused bankers, with some stopping quotations for dollar-rupee forwards in the interbank market. Several bankers described the morning session as “nervous” after the regulatory measures. Traders said state-run banks were seen offering dollars, most likely on behalf of the RBI. Forward trading was volatile, with far-tenor premiums moving between gains and losses. The USD/INR one-year forward implied yield ranged from 3.62% to 4.02%, compared with 3.83% at the previous close.

why it matters

The RBI’s actions helped lift the rupee but also disrupted parts of the forward market and increased uncertainty for traders. Amit Pabari of Mumbai-based FX advisory firm CR Forex said repeated rejection of 96.70–96.90 indicated a significant ceiling for the dollar and expected USD/INR to move toward 95.00–94.80 in the near term.

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