RBI's bid to lift Indian rupee put to test by oil, US yields

MUMBAI: The Indian rupee is on course to open lower on Wednesday, pressured by a surge in oil prices and rising U.S. ​Treasury yields, threatening to blunt the momentum the currency has ‌built with the central bank’s intervention.

The Indian rupee is expected to open in the 95.02-95.06 range, according to traders, after settling at 94.95 to the dollar on Tuesday.

The ​currency is on a three-day winning streak after touching a two-month ​high of 94.80 on Tuesday.

The rupee’s rally has come despite ⁠multiple headwinds and has been driven largely by aggressive intervention from ​the Reserve Bank of India, with flow-related dollar selling by foreign banks providing ​additional support, traders said.

In recent sessions, the rupee has been among the better-performing Asian currencies.

The question now is whether the RBI will step in again and absorb the pressure ​coming from higher oil prices, a currency trader at a bank ​said.

At the moment, the central bank is effectively the only meaningful dollar seller in the ‌market, ⁠and without its presence, it is difficult to see the rupee holding on to current levels, he added.

The RBI’s intervention comes against the backdrop of a surge in deposits from non-resident Indians, which has strengthened its firepower. ​Inflows under the ​FCNR(B) scheme topped $100 ⁠billion by the Aug. 31 deadline for banks to raise deposits eligible for concessional swaps with the RBI, ​the Financial Express reported.

Oil, US yields pressure builds

Oil extended its ​rally ⁠in Asian trading, with Brent futures climbing to $95.50 a barrel after fresh exchanges of strikes between the U.S. and Iran overnight heightened fears of supply disruptions ⁠and ​dashed hopes of a near-term easing in Middle ​East tensions.

The spike in crude prices reverberated through bond markets, pushing U.S. Treasury yields to ​their highest levels since late 2023.