Key Takeaways
- The Indian rupee reached a two-month high against the U.S. dollar.
- The Reserve Bank of India (RBI) intervened by selling dollars.
- Strong growth data and inflows to a state-backed infrastructure fund supported the rupee.
The Indian rupee surged to a two-month high against the U.S. dollar on Tuesday, reaching 94.9500 per dollar, up 0.2% from the previous close. This marked its third consecutive daily rise.
The Reserve Bank of India (RBI) played a significant role, selling dollars through state-run banks, which propelled the rupee higher despite a global bond rout and a selloff in Asian currencies.
Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, attributed the rupee's strength to continued RBI intervention and flow-related dollar supply, as well as strong growth data and improved sentiment toward the currency.
Traders also noted that inflows toward a state-backed infrastructure fund contributed to the rupee's gains, adding to the overall positive momentum.
However, the rupee's gains were limited by higher global yields and the impact of Brent crude prices, which rose 2% to $92.25 per barrel in Asian trade.
Despite the rupee's gains, Finrex’s Bhansali expects the currency to trade in the 94.75 to 95.25 range in the near term, influenced by the RBI's ballooning FX forward book, which hit an all-time high of nearly $137 billion in July.
The global economic landscape, including concerns over inflation and the potential for a U.S. rate hike, also impacted the rupee's performance.
U.S. President Donald Trump's threat of further strikes against Iran raised tensions in the ongoing conflict, which had recently shifted into an economic standoff, adding to market volatility.
