RBI Defends Rupee as Oil Prices Threaten Record Low

The Indian rupee is trading near its record low, driven by rising oil prices and geopolitical tensions. The currency closed at 96.56 on Friday, close to its all-time low of 96.96 hit in late May.

Traders say the Reserve Bank of India (RBI) has been aggressively defending the 96.55-96.60 zone, but a further increase in oil prices or any new negative geopolitical development could test how far it's prepared to intervene.

The expectation of continued foreign currency inflows is another reason why traders have kept their positioning relatively light. Banks have collectively raised $20.7 billion until July 17 under the special incentive window for FCNR(B) and external commercial borrowing swap schemes to attract foreign capital and support the rupee.

Alok Singh, head of treasury at CSB Bank, said 'The response to the FCNR(B) scheme has been good, and the inflows from it are helping us manage the rupee around the 96.50 levels.' The rupee has weakened by 6.8% so far this calendar year.