MUMBAI, The Indian rupee remained mostly stable on Wednesday after trading in a narrow range against the US dollar. The local currency opened at 94.89 against the greenback and closed at 94.97, staying very close to Tuesdays settled price of 94.95. Strong and timely dollar intervention by the Reserve Bank of India (RBI) helped protect the domestic currency from sharp declines.
The rupee faced intense market pressure due to rising crude oil prices and growing global inflation concerns. Fresh military tensions between the US and Iran pushed benchmark Brent crude oil prices up to $97 per barrel. These higher energy costs also drove US Treasury bond yields to nearly three year highs. Consequently, Indian importers rushed to buy heavy volumes of US dollars. To counter this, the RBI actively supplied dollars in the spot market to absorb importer demand and curb volatility.
The central bank was able to shield the local currency easily due to strong foreign money inflows. Deposits under the Foreign Currency Non Resident (FCNR) scheme crossed $100 billion, giving the RBI a strong financial cushion. Economist Krishna Bhimavarapu noted that the FCNR scheme successfully stabilized the currency market. Meanwhile, Alok Singh , treasury head at CSB Bank in Mumbai, expects the rupee to trade in the 94.50 to 95.50 range as long as Brent crude remains under $100 a barrel.
