India's central bank intervened heavily in the foreign exchange market on Monday, pushing the rupee to its largest single-day gain in over a month. This move was supported by falling international oil prices and optimistic comments from the central bank governor.
According to informed traders, the Reserve Bank of India (RBI) sold US dollars on a significant scale in the local currency market on Monday. Driven by this intervention, the rupee strengthened by up to 0.8% against the US dollar to 95.7838, marking its biggest single-day gain since June 15.
Meanwhile, RBI Governor Sanjay Malhotra stated in an interview that the central bank's recent measures to attract foreign inflows have received a strong market response. Banks have mobilized a total of $32 billion through channels such as foreign currency deposits. These remarks further boosted market sentiment, accelerating the rupee's recovery.
Rupee still under pressure this month, ranking among Asia's worst performers
According to sources cited in reports, the RBI began selling US dollars in the market when the rupee was trading near 96.15. These sources requested anonymity.
Dilip Parmar, a forex analyst, noted that "when the RBI entered the market, it was already supported by multiple favorable factors, including falling oil prices, a weaker US dollar index, and the governor's statements." He added that intervention on a day when other factors are also positive tends to be more effective in boosting the local currency.
Despite this impressive single-day gain, the rupee's overall performance this month remains weak. Heightened US-Iran tensions have pushed international oil prices higher, fueling concerns over India's expanding import bill and continuing to weigh on the rupee. On a monthly basis, the rupee is currently the second-worst performing currency in Asia.
The decline in oil prices this month stems from easing geopolitical tensions in the Middle East. This shift has objectively created a favorable window for central bank intervention, making the market impact of this support operation more pronounced.
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