Indian Rupee Logs Biggest Single-Day Gain in Nearly Two Months on Oil Price Fall and RBI Intervention

The rupee logged its biggest single-day gain in nearly two months on Monday, buoyed by a sharp fall in crude oil prices and intervention by the Reserve Bank of India (RBI) , dealers said. The domestic currency appreciated 67 paise to close at 95.89 against the US dollar, its strongest one-day gain since June 5, when the RBI announced its last monetary policy. Brent crude prices tumbled more than 9% to $87.60 a barrel after the US and Iran paused hostilities and initiated peace talks, easing concerns over oil supply disruptions. Traders also said the RBI sold dollars in the spot market, lending further support to the rupee. “The fall in oil prices, along with RBI intervention, contributed to the rupee’s gains today. Sentiment also improved after the RBI’s comments on inflows through its recent forex measures,” said Dilip Parmar, research analyst at HDFC Securities. The rupee emerged as the best-performing Asian currency on Monday. Despite the rally, it has depreciated 6.7% against the dollar so far in the current calendar year. Market sentiment was also aided by strong inflows under the RBI’s foreign exchange mobilisation measures. RBI Governor Sanjay Malhotra told a news agency that banks have mobilised nearly $32 billion through the recent measures, with the bulk coming via FCNR(B) deposits. He added that total inflows are likely to remain robust given the current pace of mobilisation. “What is important is the pattern of these schemes. Historically, the surge comes in the final phase, in the last few weeks before the window closes at the end of September,” said Anindya Banerjee, head of currency and commodity research at Kotak Securities. He added that if the current run rate holds and that end-phase surge materialises, total inflows can comfortably reach $50-60 billion. “That would provide significant ammunition to the RBI, although the extent of support for the rupee will depend on how much of these inflows the central bank allows into the spot market instead of absorbing them into its foreign exchange reserves,” he said. Parmar said crude oil prices would remain the key driver for the rupee in the near term. “Geopolitical uncertainty continues to weigh on the currency. However, concerns over forex flows have eased somewhat as inflows have remained encouraging so far,” he said, adding that the rupee is expected to trade in the 95.50-96.30 range in the near term.