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The rupee appreciated against the US dollar for a fifth consecutive session after a choppy trade on Tuesday, supported by a decline in crude oil prices and likely dollar sales by state-run banks on behalf of the Reserve Bank of India (RBI), said dealers.
The Indian currency settled at 95.59 per dollar against the previous close of 95.82 per dollar.
The central bank continued its sell/buy swap to drain excess liquidity from the banking system. Traders said the central bank’s swap operations were concentrated around the January 2027 maturity.
The rupee has depreciated by 4.83 per cent since the onset of the US-Iran war. In the current calendar year, the rupee has depreciated by 5.98 per cent, whereas in the current financial year (FY), it has depreciated by 0.82 per cent.
Brent crude fell 1.5 per cent to $98.8 a barrel after reports that Iran could reopen the Strait of Hormuz if the US eases military pressure and lifts its blockade.
“The Indian rupee surged following a sharp decline in crude oil prices, driven by reports that the Strait of Hormuz could soon reopen. The currency has found a measure of stability, supported by falling oil costs and a broader recovery in Asian currencies,” said Dilip Parmar, research analyst at HDFC Securities.
The rupee had come under pressure earlier in the session when oil prices were higher, but dollar sales by state-run banks helped limit the currency’s losses, traders said. Two-way moves in the currency also prompted traders to keep positions small with tight stop-losses.
“In the near term, the spot rupee pair finds immediate support at 95.40, with resistance capped at 96.10,” Parmar said.
The yield on the benchmark 10-year government bond also softened by 4 basis points to settle at 7.01 per cent, against the previous close of 7.05 per cent.
“The market has been tracking the global cues, with crude falling, there was some buying interest,” said a dealer at a primary dealership.
Meanwhile, the net liquidity in the banking system fell to a surplus of ~ 4.91 trillion on Monday, latest data by the RBI showed. The liquidity had peaked at ~11.16 trillion during the first week of September.
The overnight weighted average call rate (WACR), which is the operating target of the monetary policy, settled at 5.24 per cent, flat against the previous close.
The RBI’s open market operation (OMO) sales and tax outflows helped absorb surplus liquidity from the banking system in the current week, moving the weighted average call rate near the policy repo rate.
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