The Reserve Bank of India (RBI) intervened in the foreign exchange market on Monday after the Indian rupee weakened close to its record low, pressured by rising global crude oil prices and heightened geopolitical tensions in West Asia. According to market participants, the central bank sold US dollars in both offshore non-deliverable forward (NDF) and onshore spot markets to curb excessive volatility in the domestic currency.
The rupee has remained under sustained pressure in recent sessions as a sharp increase in oil prices boosted demand for the US dollar. India, which imports more than 80 per cent of its crude oil requirements, remains particularly vulnerable to rising energy costs, with higher import bills typically weighing on the local currency. Traders said the RBI’s intervention helped prevent a steeper depreciation, although the rupee continued to hover near historic lows.
Oil Prices Remain Key Risk For The Rupee
Market participants believe the trajectory of the rupee this week will largely depend on the movement in international crude oil prices and the intensity of RBI’s market intervention. Escalating tensions in the Middle East have fuelled concerns over possible supply disruptions, keeping crude prices elevated and strengthening the US dollar against several emerging market currencies.
Apart from crude prices, investors are also tracking global macroeconomic cues, including US economic data and expectations surrounding the Federal Reserve’s monetary policy, which continue to influence capital flows into emerging markets. Currency dealers noted that while RBI intervention can smooth sharp fluctuations and deter speculative bets against the rupee, the central bank is unlikely to defend any specific exchange rate level. Instead, its focus remains on ensuring orderly market conditions and preventing excessive volatility.
Analysts expect the domestic currency to remain sensitive to external developments in the coming days, particularly movements in crude oil prices and geopolitical events. Unless energy prices ease significantly or global risk sentiment improves, the rupee may continue to face downside pressure despite periodic support from the central bank.
