Rupee climbs to seven-month high as RBI steps up forex support

The rupee opened at 94.90 and strengthened to 94.80 in early interbank forex trading on Monday, extending Friday's 10-paise rally to 94.89. The sharp appreciation represents the currency's most robust weekly performance since mid-2023, driven primarily by the Reserve Bank of India's structural forex market operations.

Market participants attributed the rupee's resilience to RBI support measures aimed at stemming months of depreciation pressure. The central bank has intensified its intervention as the rupee approached critical support levels near 94.00, challenging headwinds from elevated US Treasury yields and persistent foreign portfolio outflows.

However, the rally's sustainability remains uncertain. Brent crude oil prices have surged to USD 110 per barrel, a development that analysts warn could undermine the rupee's recovery. Higher crude costs threaten India's import bill and current account, typically weighing on the currency. Traders noted the rupee has held below the 95.00 level for three consecutive sessions, with the next key technical level positioned around 94.70-94.80.

Market observers expect the rupee to test deeper support at 94.00 if it sustains a break below 94.80, provided crude prices stabilise and foreign capital flows show signs of reversal. For now, the RBI's continued presence in the forex market remains the primary backstop against a sharper depreciation.

Photo: The Reserve Bank of India building in Mumbai, November 2019. Sailko via Wikimedia Commons (CC BY 3.0).