The Indian Rupee (INR) trades marginally higher against the US Dollar (USD) on Thursday on possible Reserve Bank of India (RBI) intervention in spot and non-deliverable forwards (NDFs) markets to support the currency. The USD/INR pair edges down to near 96.47, but is still close to its two-month high of 96.75 posted on Monday.
According to a Reuters report, the RBI likely intervened in the foreign exchange market on Thursday to limit the INR’s losses as a relentless rise in oil prices deepened the South Asian unit’s drift back towards record lows.
The Indian central bank is seen intervening several times in the past few weeks, as the Asian currency has underperformed significantly due to higher oil prices and the consistent outflow of foreign funds from the Indian stock market.
Oil prices will likely keep INR’s upside limited
The recovery move in the Indian Rupee on Thursday will likely prove to be short-lived as intensified Middle East energy supply risks are fuelling oil prices.
In the opening trade, the MCX Crude Oil contract expiring on August 19 trades 1.75% higher at around Rs. 8,570, the highest level seen in over six weeks.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.
Earlier in the day, Yemen’s Iran-aligned Houthis carried out missile and drone strikes on two Saudi oil tankers in the Red Sea– naming one as the Encelia – as part of a maritime blockade on the kingdom amid the US-Iran war, The Guardian reported.
Oil shock seen supporting commodity FX while Asia buffers hold
Strategists at BNY Mellon argue that “oil at $95 is an FX shock, but not a broad Asia balance-of-payments crisis,” pointing to “stronger current-account buffers” in ASEAN and India alongside “lighter positioning” as key shock absorbers. In their view, the “cleaner opportunity is in high-carry commodity FX such as BRL, CLP and ZAR,” where elevated energy prices can underpin currencies with attractive yield. They add that NOK may attract some “oil-linked demand,” but caution that “elevated holdings and limited Norges Bank buying cap the upside,” tempering the scope for a more pronounced Krone rally.
FIIs remain net sellers on Wednesday
There seems to be a sense of caution among Foreign Institutional Investors (FIIs) toward the Indian stock market amid surging energy prices. On Wednesday, FIIs turned out to be net sellers, offloading their stake worth Rs. 819.20 crore.
So far this month, foreign investors have remained overall net sellers and have reduced their stake worth Rs. 4836.95 crore.
Technical Analysis: USD/INR approaches all-time high near 97.10
USD/INR trades marginally lower at around 96.53 in India’s late afternoon trading hours, but holds a bullish near-term bias as it trades above the 20-period exponential moving average (EMA), which is at 95.88.
The Relative Strength Index (RSI) at 64.10 stays in positive territory but below overbought levels on the daily chart, suggesting firm upward momentum without yet signaling exhaustion.
On the downside, immediate support is located at the 20-period EMA at 95.88, which reinforces the broader constructive structure while it remains intact. Looking up, the all-time high at around 97.10 is the key resistance level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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