The Indian rupee appreciated 19 paise to close at 95.80 against the US dollar on Friday, September 25, recovering from a one-week low as Reserve Bank of India intervention, easing crude prices and a softer dollar offered relief. The currency held above the psychologically significant 96 mark and ended the week nearly flat.
The rupee had fallen to 95.9550 on Thursday before rebounding on Friday as crude eased and the RBI stepped in. The currency traded in a range of 95.57 to 95.9550 through the week, having closed the previous week at 95.8725.
RBI's $10 billion swap push
The central bank carried out currency swaps worth at least $10 billion in recent weeks, with maturities from one month to about six months, aimed at draining surplus rupee liquidity and curbing inflation risks. In sell-buy swaps, the RBI sells dollars to banks for rupees and agrees to reverse the deal later, tightening cash conditions. State-run banks were also spotted doing dollar-rupee sell-buy swaps on the RBI's behalf, with spot-market intervention likely on Wednesday and Friday.
Banking-system liquidity surplus stood at Rs 4.44 lakh crore on Tuesday, down 60% from its record high of Rs 11.16 lakh crore on September 6. The one-year forward yield rose as much as 28 basis points in three sessions to touch 3.50% on Friday, its highest since May.
Crude and yields cap the gains
Relief came from Brent crude easing to $105.40 per barrel on Friday from Thursday's high of $106.88, which had been driven by Houthi missile attacks on Saudi Aramco facilities. Reports of possible US-Iran talks over a phased reopening of the Strait of Hormuz added to the calm, while the dollar index eased to 101.09 from its two-month high of 101.2.
But structural headwinds remain formidable. The 10-year US Treasury yield climbed to 5.15%, its highest since July 2007, while the 30-year yield touched 5.446%, the highest since June 2004 — pulling capital toward dollar assets. India's crude oil basket surged to $123.67 per barrel on September 24, averaging $115.48 for the month so far, up 28% from the August average of $90.19. Foreign portfolio investors remained net sellers for a fifth straight week, offloading Rs 7,620 crore of Indian equities and taking September outflows to Rs 23,676 crore through September 19, per NSDL data.
Forex reserves fell $14.89 billion to $765.90 billion in the week ended September 18, reflecting the RBI's dollar sales. With Brent above $105 and US yields elevated, analysts see the rupee's near-term range between 95.55 and 96.30, with RBI intervention cushioning sharper losses.
Sources:
Rupee Closes at 95.80 as RBI's $10 Billion Swap Push and Easing Crude Offset Strong Dollar and Reserve Drawdown — HDFC Sky (citing RBI, NSDL, PPAC data)
The rupee had fallen to 95.9550 on Thursday before rebounding on Friday as crude eased and the RBI stepped in. The currency traded in a range of 95.57 to 95.9550 through the week, having closed the previous week at 95.8725.
RBI's $10 billion swap push
The central bank carried out currency swaps worth at least $10 billion in recent weeks, with maturities from one month to about six months, aimed at draining surplus rupee liquidity and curbing inflation risks. In sell-buy swaps, the RBI sells dollars to banks for rupees and agrees to reverse the deal later, tightening cash conditions. State-run banks were also spotted doing dollar-rupee sell-buy swaps on the RBI's behalf, with spot-market intervention likely on Wednesday and Friday.
Banking-system liquidity surplus stood at Rs 4.44 lakh crore on Tuesday, down 60% from its record high of Rs 11.16 lakh crore on September 6. The one-year forward yield rose as much as 28 basis points in three sessions to touch 3.50% on Friday, its highest since May.
Crude and yields cap the gains
Relief came from Brent crude easing to $105.40 per barrel on Friday from Thursday's high of $106.88, which had been driven by Houthi missile attacks on Saudi Aramco facilities. Reports of possible US-Iran talks over a phased reopening of the Strait of Hormuz added to the calm, while the dollar index eased to 101.09 from its two-month high of 101.2.
But structural headwinds remain formidable. The 10-year US Treasury yield climbed to 5.15%, its highest since July 2007, while the 30-year yield touched 5.446%, the highest since June 2004 — pulling capital toward dollar assets. India's crude oil basket surged to $123.67 per barrel on September 24, averaging $115.48 for the month so far, up 28% from the August average of $90.19. Foreign portfolio investors remained net sellers for a fifth straight week, offloading Rs 7,620 crore of Indian equities and taking September outflows to Rs 23,676 crore through September 19, per NSDL data.
Forex reserves fell $14.89 billion to $765.90 billion in the week ended September 18, reflecting the RBI's dollar sales. With Brent above $105 and US yields elevated, analysts see the rupee's near-term range between 95.55 and 96.30, with RBI intervention cushioning sharper losses.
Sources:
Rupee Closes at 95.80 as RBI's $10 Billion Swap Push and Easing Crude Offset Strong Dollar and Reserve Drawdown — HDFC Sky (citing RBI, NSDL, PPAC data)
