The rupee opened 6 paise lower at 96.26 against the US dollar on Friday, 22 May, tracking weakness in Asian currencies and showing limited follow-through after the Reserve Bank of India’s intervention-led rebound in the previous session.
The domestic currency had declined 2.5% over the past nine sessions and was nearing the 97-per-dollar mark for the first time before RBI intervention helped stabilise it. According to a Reuters report, market participants are now closely watching whether the central bank steps in again to support the rupee amid persistent external pressures.
Analysts noted that the rupee will face challenges amid weakness across many Asian currencies, though it may receive some support from the recent decline in oil prices. The dollar index remained close to a six-week peak.
According to experts, the recent cooling in crude oil prices has offered temporary relief to the rupee after weeks of pressure from elevated energy costs and geopolitical uncertainty. Brent crude eased near $ 104 per barrel following constructive comments from US Secretary of State Marco Rubio on diplomatic discussions with Iran, helping improve market sentiment.
RBI liquidity measures boost market confidence
Experts also noted that confidence around the Reserve Bank of India’s planned $5 billion buy-sell swap auction on 26 May has supported the domestic currency. Market participants believe the move could improve liquidity in the banking system and help the RBI manage excessive forex volatility more effectively.
Despite global headwinds, India’s macroeconomic indicators remain resilient, with the HSBC Composite PMI for May staying strong at 58.1.
Strong US dollar limits further rupee gains
However, experts caution that the US dollar remains firm globally after strong US manufacturing data reinforced expectations that the Federal Reserve may keep interest rates elevated for longer, limiting further gains in emerging-market currencies like the rupee.
Rupee Outlook
Amit Pabari, MD, Research Team, CR Forex Advisors, said that we are heading into a period of elevated volatility in USD/INR. In the near term, gap-up and gap-down moves of 50 paise to 1 rupee cannot be ruled out, driven by geopolitical developments, RBI actions, and global cues.
“Any supportive measures like RBI swaps or positive deal flows could strengthen the rupee, while the absence of such triggers may gradually push the pair towards 97.00 levels.
Geopolitical tensions remain the key risk factor. A sustained close below 94.80 would be needed to signal a broader trend reversal in the rupee,” added Pabari.
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