Persistent dollar demand from hedgers continued to weigh on the currency, even as the Reserve Bank of India (RBI) appears to be limiting the rupee’s downside through dollar sales.
The rupee remained in a narrow 3-4 paise range for much of Wednesday (August 12), with steady dollar supply from state-run banks, likely on behalf of the RBI. The currency staged a late recovery after further dollar selling and eventually closed about 0.1% higher.
The rupee has traded within a range of less than 30 paise so far this week, while near-term realised volatility has also fallen sharply.
A currency trader at a bank said the RBI’s near-continuous presence in the market is increasingly reducing the impact of external cues such as crude oil prices and broad dollar movements.
At the same time, elevated oil prices continue to support demand for dollars. Brent crude briefly moved above $90 a barrel on Wednesday (August 12) before easing to around $88 in Asian trade on Thursday, amid lower demand forecasts and uncertainty around US-Iran talks.
Fed rate hike expectations ease
The rupee could also get some support from a marginal easing in expectations of a US Federal Reserve rate hike next month. July US inflation data was broadly in line with market expectations.
According to CME Group’s FedWatch tool, markets are now pricing in around a 40% probability of a Fed rate hike next month, down from 54% a week ago.
MUFG Bank said the inflation data should allow the Fed to remain on hold for now, although it may not be strong enough to trigger a significant shift in investor positioning.
For the rupee, the combination of RBI intervention, persistent oil-related dollar demand and changing expectations around US interest rates is likely to keep the currency range-bound in the near term.
-With Reuters inputs
First Published: Aug 13, 2026 9:33 AM IST
