Indian Rupee Rises for Third Day as RBI Intervention Moderates
The Indian rupee strengthened to 95.64 against the dollar on Wednesday, supported by sustained foreign institutional inflows and moderated central bank intervention, signaling resilient market sentiment despite broader fiscal year weakness.
The Indian rupee closed at 95.64 against the US dollar on Wednesday, gaining 21 paise from its previous close of 95.85. This marks the currency's third consecutive session of appreciation, pushing it to a near three-week high.
Market participants noted that the Reserve Bank of India continued its dollar sales to manage exchange rate volatility. However, traders observed that the scale of these central bank interventions was noticeably more moderate than in the preceding two trading sessions.
This currency resilience is largely underpinned by improving foreign investor sentiment in local assets. "FII flows have also remained positive over the past few sessions," said Jateen Trivedi, vice president and currency research analyst at LKP Securities.
Intraday trading patterns reflected strategic positioning by different corporate and state actors. A market trader indicated that stronger exchange rate levels triggered dollar buying from defence firms, while weaker levels prompted dollar sales by nationalised banks, likely acting on behalf of the central bank.
Despite this positive momentum, the rupee's upside was capped by shifting global energy markets. Crude oil prices, which had eased to approximately $85 per barrel on Tuesday, staged a modest rebound to around $87 per barrel, limiting further gains in the local currency.
The recent rally offers some short-term relief, but the broader macroeconomic trend remains challenging. The rupee has still weakened by 0.8 percent so far in the current fiscal year, reflecting persistent external headwinds for the economy.
In the domestic debt market, yields on the 10-year benchmark government bond remained stable amid the currency movements. The yield traded in a narrow range between 6.78 percent and 6.80 percent before closing at 6.79 percent on Wednesday, up slightly from the prior close of 6.78 percent.
Market dealers reported a cautious approach to taking large positions in the bond market this week. This hesitation stems directly from anticipation surrounding the upcoming government bond auction scheduled for Friday.
