The rupee closed at 83.9625 against the U.S. dollar, nearly unchanged from its close at 83.9775 in the previous session.
The currency is hovering close to its all-time low of 83.9850 but has avoided weakening below it on account of the Reserve Bank of India‘s market interventions.
The interventions were complemented by informal instructions to banks on Monday to refrain from betting heavily against the rupee, which prompted some traders to reduce the size of their bets against the rupee and tweak their trading approach.
Bids on the dollar-rupee pair “were significantly fewer,” on Tuesday while a dip in oil prices is also a positive cue for the local currency, a foreign exchange trader at a state-run bank said.
Brent crude oil futures declined to $79.4 per barrel on Tuesday after rising for five consecutive trading sessions on concerns that escalating conflict could disrupt oil supplies from the Middle East. The dollar index was tad lower on the day at 102.5 but has risen about 1.5% over October so far while crude oil prices are up about 10% in the same period. A rise in oil prices coinciding with dollar strength “have increased inflation risks in India and put pressure on the rupee, such that the RBI has had to undertake significant FX intervention in recent days,” J.P. Morgan analysts said in note on Tuesday.
Investor focus is now on the Indian central bank’s monetary policy decision due on Wednesday. J.P. Morgan expects the central bank to keep policy rates and its stance unchanged “along with a cautious tone until the current global storm passes.”
