The Indian rupee rallied to close above the 96-per-dollar mark for the first time in a week on Friday, helped bythe central bank's aggressive interventions to arrest the currency's slide from 94.50 to nearly 97. The rupee closed at 95.69 per dollar, up 0.5% from its close in the previous session. The Reserve Bank of India sold $2 billion to $3 billion on Thursday and intervened in the markets again on Friday, according to bankers. Two state-run lenders were consistently selling dollars through Friday's trading session, three traders told Reuters, adding that this marked a change from relatively subdued and intermittent activity in the earlier part of the week. "It seems the RBI's intends to draw some version of a line-in-the-sand for rupee weakness," a senior trader at a foreign bank said. The currency had weakened from 94.50 on May 8 to a record low of 96.96 on May 20. State-run banks were spotted conducting dollar-rupee buy/sell swaps as well, most likely on behalf of the RBI, the bankers added. Dollar-rupee forward premiums fell as a result, with the 1-year implied yield down 6 basis points at 3.39%. The central banks' presence also ensured that the rupee was largely unfazed by a more than 2% rise in Brent crude prices to $105 per barrel on Friday as investors doubted the prospect of a breakthrough in U.S.-Iran talks. "We continue to view the Indian Rupee as vulnerable across a range of scenarios on the Strait of Hormuz, with USD/INR likely moving towards 98.00 levels and even 100.00 is in sight if the conflict prolongs or escalates," Michael Wan, senior currency analyst at MUFG said in a note. MUFG also expects the RBI to hike rates by 25 bps each in June and August, following a similar projection by Standard Chartered. Elsewhere, Asian currencies were mostly weaker on the day, with losses led by a 0.6% fall in the Korean won.
RBI helping hand muscles breathing room for rupee, cools forward premiums
The Indian rupee strengthened to close above 96 per dollar for the first time in a week, following aggressive interventions by the Reserve Bank of India. The central bank sold billions of dollars and engaged in buy/sell swaps, pushing the rupee up despite rising crude oil prices. Analysts remain cautious, predicting potential further weakening if geopolitical tensions escalate.













