The Indian rupee opened 6 paise higher at 95.64 against the US dollar on Monday, 24 August, supported by robust capital inflows, while traders remained watchful of crude oil prices and potential intervention by the Reserve Bank of India (RBI) to maintain currency stability.
Crude oil prices eased on Monday as investors awaited an expected announcement from Washington on fresh sanctions against Iran, which could further disrupt energy supplies from the Middle East. US President Donald Trump has also threatened sanctions against countries continuing to trade with Iran.
While uncertainty surrounding the US-Iran conflict could keep risk appetite under pressure, the rupee is expected to find support from the RBI’s continued presence in the foreign exchange market, similar to the intervention seen over the past two weeks.
Over the weekend, the RBI said it had mobilised nearly $73 billion through measures introduced in June to strengthen India’s balance of payments, helping push the country’s foreign exchange reserves to just below a record high.
Iran’s ‘Economic D-Day’ puts markets on edge
Washington is set to announce a fresh round of sanctions against Iran, targeting its oil trade, banking network and shipping routes. Treasury Secretary Scott Bessent has described the measures as the toughest economic squeeze attempted against an adversary, aimed at cutting off Tehran’s remaining economic lifelines after months of conflict.
For markets, the key concern is the potential impact on countries that continue to trade with Iran. Until the details of the sanctions are announced, oil and currency markets are likely to remain cautious, experts said.
Brent crude is hovering above $90 a barrel, with shipping through the Strait of Hormuz still running at a fraction of normal levels. Meanwhile, the Dollar Index is around 98.8, down nearly 1% this week amid concerns over US debt and a fresh Treasury bond buyback plan. Gold has also benefited from the uncertainty, rising more than 5% this week to around $4,600 an ounce.
RBI rebuilds forex war chest as rupee faces fresh risks
India’s foreign exchange reserves jumped nearly $10 billion in the week ended 14 August to $716.9 billion, their highest level in around six months. The increase was driven by a $7.2 billion rise in foreign currency assets and a $2.7 billion increase in gold reserves. Overall, reserves have risen by nearly $50 billion in seven weeks, moving closer to the record high of $728.5 billion.
Experts said the sharp increase reflects the impact of the RBI’s measures to attract foreign currency inflows, which had mobilised around $56.84 billion as of 13 August. However, much of the inflow has effectively strengthened the central bank’s reserve position rather than translating into sustained rupee appreciation.
The RBI has also brought forward the deadline for its FCNR(B) deposit scheme by a month. Once the window closes, the additional inflow support could begin to fade, potentially leaving the rupee more vulnerable to elevated crude prices and geopolitical risks, experts said.
Rupee Outlook
Amit Pabari, MD, Research Team at CR Forex Advisors, said the rupee is likely to trade in a narrow range of 95.60–95.80 in the near term. However, he cautioned that the current calm could precede increased volatility, with the expected Iran sanctions announcement emerging as a key trigger. Pabari added that with the RBI’s dollar cushion beginning to thin, his earlier view of the rupee moving towards 96.50 remains intact.
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