The Indian rupee opened 15 paise stronger at 95.76 against the US dollar on Tuesday, 28 July, supported by sustained intervention from the Reserve Bank of India (RBI) and a sharp decline in crude oil prices, which helped offset the broader strength in the US dollar.
The domestic currency has staged a notable rebound after appearing set to breach the 97-per-dollar mark at Friday’s open. The recovery was driven by the RBI’s intervention to defend the currency, along with easing crude oil prices that reduced pressure on India’s import bill.
The RBI reportedly continued selling dollars on Monday, triggering stop-losses on long-dollar positions and accelerating the rupee’s gains. As a result, the Indian currency touched its highest level in two weeks and recorded its biggest single-day advance in around six weeks.
According to a Reuters report, a trader at a private-sector bank said the decline in oil prices alone would not have been sufficient to reverse sentiment towards the rupee. The trader noted that the RBI’s persistent intervention has been the key driver behind the currency’s recovery and is likely to keep speculative bets against the rupee in check over the next few sessions.
RBI reiterates market-driven exchange rate policy
According to market experts, the RBI has reiterated that its interventions in the foreign exchange market are aimed at curbing excessive volatility rather than defending any specific exchange rate. RBI Governor Sanjay Malhotra also indicated that it would be reasonable to believe the rupee is not undervalued at current levels, reinforcing the central bank’s preference for allowing the currency to reflect underlying market fundamentals while ensuring orderly market conditions.
Oil relief hinges on diplomatic hopes
Experts said the recent decline in crude oil prices has been driven largely by optimism surrounding possible diplomatic progress in the Middle East. US President Donald Trump said Washington and Tehran were engaged in “good talks,” raising hopes that tensions could ease and prompting traders to unwind part of the geopolitical risk premium that had pushed Brent crude above $100 per barrel last week.
However, analysts cautioned that the region remains fragile. Reports of Saudi Arabia intercepting drones allegedly launched by Iran-backed groups and fresh claims by Yemen’s Houthi rebels of attacks on Saudi energy infrastructure underscore that geopolitical risks remain elevated. Concerns over the security of the Strait of Hormuz, a critical global oil shipping route, also continue to linger.
Fed decision remains the key risk
While softer crude prices have supported sentiment, experts believe the market’s focus has now shifted to the US Federal Reserve’s policy decision.
With US inflation still above the Fed’s target, investors will closely monitor the central bank’s policy announcement and comments from Federal Reserve Chair Kevin Warsh for clues about the future path of interest rates. Market participants are not fully pricing in another rate hike, making the policy statement and accompanying guidance particularly significant.
According to analysts, any hawkish surprise from the Fed could strengthen the US dollar, raise US Treasury yields, and renew pressure on emerging-market currencies, including the Indian rupee.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, said The correction in crude oil prices has provided short-term relief to the rupee and pushed USDINR below the 96.00 mark. However, we continue to believe that this move is more of a correction than a reversal.
The 95.70–95.80 zone is expected to serve as strong support. As long as this level holds, the broader trend remains tilted in favour of a stronger dollar. We continue to expect USDINR to move towards the 96.80–97.00 zone.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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