RBI Steps In to Support Rupee Amid Oil Price Surge and Rate Hike Bets

The Reserve Bank of India (RBI) intervened in the currency market to support the rupee, which had fallen due to rising oil prices and expectations of a US interest rate hike. The RBI's efforts helped the rupee recover, with the currency quoting at 95.44 to the dollar by 11:49 am IST.

Oil prices surged 3.2% to $90.92 after the latest escalation involving the US and Iran. Investors also increased bets on a Federal Reserve rate hike at its September 15-16 meeting, following Fed Chair Kevin Warsh's hawkish tone in his recent speech.

The RBI's intervention was not limited to the spot market, as it also conducted dollar-rupee buy/sell swaps in very short-dated tenures. This helped cool overnight swap rates that had surged due to abundant dollar liquidity from FCNR(B)-related inflows.