The Indian rupee has witnessed a phase of relative stability in recent weeks, supported by robust foreign inflows and strategic intervention by the Reserve Bank of India (RBI). As global markets remain volatile and crude prices fluctuate, the RBI’s calibrated moves in the forex market have played a key role in maintaining balance.
Rupee Movement in Recent Sessions
After weeks of mild depreciation, the rupee has gained marginally against the US dollar, hovering in a stable range.
This recovery can be attributed to:
Strong FPI inflows into equity and debt markets
Moderating crude oil prices, easing import cost pressures
Central bank intervention to curb volatility
The RBI’s approach has been measured and strategic, ensuring that the rupee neither appreciates nor depreciates sharply — preserving export competitiveness and import stability.
RBI’s Role: Balancing the Market
The RBI’s forex operations involve both spot and forward market interventions. These actions help:
Smooth out short-term volatility caused by global currency movements
Absorb excessive foreign inflows to prevent undue rupee appreciation
Build forex reserves, strengthening India’s external position
Analysts suggest that the RBI’s timely dollar purchases and liquidity management have supported the rupee while maintaining market confidence.
Support from Foreign Inflows
Equity Inflows: Renewed investor confidence in India’s growth story has led to steady foreign portfolio investments (FPIs) in equities.
Debt Market Participation: The inclusion of Indian government bonds in global indices has sparked significant foreign debt inflows, supporting the currency.
Corporate Dollar Inflows: Higher remittances and export earnings have further strengthened the rupee’s position.
Together, these inflows have provided natural support to the domestic currency, reducing the RBI’s burden of frequent interventions.
Global Context: Dollar Trends & Oil Prices
The US dollar index has shown signs of cooling off amid speculation of Federal Reserve rate cuts, easing pressure on emerging market currencies like the rupee.
At the same time, stable crude prices near $80/barrel have offered relief on India’s import bill — a key factor for rupee strength.
Outlook: Stability Ahead?
Market experts believe the rupee could remain in a narrow trading band, supported by:
Healthy capital inflows
Robust forex reserves (around $650 billion)
Moderate inflation and fiscal stability
However, global headwinds — such as oil price spikes or renewed dollar strength — could test this equilibrium in the coming months.
FAQ
1. Why does the RBI intervene in the forex market?
To reduce volatility, stabilize exchange rates, and ensure orderly market conditions.
2. What are the main factors influencing rupee movement now?
Foreign inflows, crude prices, and global interest rate trends.
3. How do inflows support the rupee?
When foreign investors bring dollars into India, the supply of foreign currency increases, strengthening the rupee.
4. Will the rupee appreciate further?
Analysts expect limited appreciation, as the RBI prefers a stable, range-bound rupee to support exports.
5. What is the rupee’s near-term outlook?
Likely to trade between ₹83.00 and ₹83.40 per USD, assuming stable global conditions.
Published on : 7th October
Published by : SMITA
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