Rupee Stabilized at 95.95 Amid Oil Price Concerns and US-Iran Tensions

The Indian rupee has been struggling in recent sessions due to concerns over oil prices and US-Iran tensions. However, the Reserve Bank of India's (RBI) intervention has managed to keep the currency just above the 96/USD level. The rupee declined by 0.1% on Monday to 95.95 per dollar.

The Brent crude price rose by 2.5% to $107 per barrel after US President Donald Trump rejected a peace deal from Iran, leading to higher global bond yields and increased pressure on emerging market currencies like the rupee. India imports nearly 90% of its crude requirements, making it vulnerable to Middle East oil shocks.

Analysts at BofA Global Research believe that the RBI is willing to spend incremental reserves to prevent INR weakness beyond 96/USD level. This view was echoed by data showing a $15 billion decline in India's foreign exchange reserves as of September 18, likely due to interventions to support the rupee.

The rupee's 1-month implied volatility remains low at 4.2%, below its year-to-date average of 5%. The RBI's efforts have kept rupee volatility expectations subdued despite persistent headwinds.