The Indian rupee recovered sharply on Thursday, May 21, after likely intervention by the Reserve Bank of India (RBI) and a correction in crude oil prices helped improve sentiment in the currency market.
The rupee was quoting near 96.75 against the US dollar in early interbank trade before recovering to around 96.20, according to traders cited by Reuters. The domestic currency had settled at a record low of 96.82 on Wednesday after remaining under pressure for nine straight sessions.
Traders said the sharp recovery was likely driven by dollar-selling intervention from the RBI aimed at stabilising the rupee after repeated record lows in recent sessions.
USDINR futures were trading near 96.59 on Thursday morning, up 0.18%.
The rupee also found support after Brent crude oil prices declined sharply. Brent crude dropped 5.6% on Wednesday and hovered near the $105 per barrel mark amid hopes of progress in US-Iran negotiations.
US President Donald Trump said negotiations with Iran were in the final stages while also warning of further attacks if no agreement was reached. Easing oil prices reduced pressure on global bond yields and emerging market currencies.
The benchmark 10-year US Treasury yield also cooled off, falling nearly 10 basis points on Wednesday to below 4.60% after recent concerns that elevated inflation could force the Federal Reserve to keep rates higher for longer.
Currency traders, however, cautioned that the broader trend for the rupee remains weak due to ongoing geopolitical tensions, elevated crude prices and pressure from global interest rates.
The RBI on Wednesday also announced a $5 billion dollar/rupee buy-sell swap auction with a three-year tenor scheduled for May 26. Bankers said the move is expected to help manage liquidity and reduce forward premiums in the currency market.
Despite Thursday’s rebound, the rupee has declined around 2.5% over the last nine sessions and remains one of the weaker-performing Asian currencies amid continued global uncertainty.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Currency markets are subject to global market risks and geopolitical developments.