FX.co ★ Rupee Rises on Dollar Weakness

The Indian rupee firmed to about 95.62 per dollar, rebounding from a three-week low as a softer US dollar and lower US Treasury yields lent support. The dollar index dropped 0.88% on Wednesday—its steepest decline since mid-March—after the US Treasury announced it would double liquidity-support buybacks for longer-dated bonds to at least $4 billion per operation, easing pressure in the US bond market.

Still, the rupee’s recovery is expected to be capped, with Brent crude trading near $92 a barrel as markets weigh the impact of the US–Iran conflict and ongoing shipping disruptions in the Strait of Hormuz.

Meanwhile, RBI Governor Sanjay Malhotra noted that the central bank’s net short forward-dollar position remains “very manageable,” with the RBI anticipating at least $80 billion in inflows from FCNR(B) deposits and foreign-currency borrowing. He emphasized that intervention will remain aimed at containing volatility and speculative activity, adding that the early closure of the FCNR(B) swap window reflected stronger capital inflows and rising sterilisation costs.