RBI Interventions Send INR Soaring Despite Oil Price Rise

The Indian Rupee has detached from reality in recent weeks, surging despite rising oil prices and a relatively stable US dollar. According to Reuters, bankers have reported that the RBI has been increasingly active before market opening and throughout trading days.

This interventionist approach has pushed the rupee higher, but analysts expect dip-buyers to step in soon as gains from interventions usually fade without changes in fundamentals.

The US CPI data on Friday will be a key indicator of interest rate expectations, with a negative reading potentially weakening the dollar across the board. In the short-term, oil prices and hawkish/dovish repricing in Fed interest rate expectations will continue to drive the INR-US dollar exchange rate.