RBI Buys Time for Rupee as Oil Prices and Yields Surge
The Reserve Bank of India (RBI) took measures to stabilize the rupee against a backdrop of rising oil prices and US Treasury yields. Despite Brent crude briefly hitting $97 per barrel, driven by renewed US, Iran tensions, and the US 10-year Treasury yield reaching its highest level in almost three years, the RBI kept the rupee steady at around 94.97 per US dollar.
Traders credited the RBI's actions for selling dollars before trading opened and maintaining a presence throughout the day to dampen volatility. This was aided by large foreign currency non-resident (FCNR) deposits, which have seen inflows exceeding $100 billion according to estimates by State Street Investment Management.
The influx of these funds provided a crucial cushion against the potential impact of higher oil prices and US yields on India's import bill and inflation outlook. As a result, CSB Bank predicts that the rupee could remain within a range of 94.50-95.50 if Brent crude stays below $100.