Rupee Gains Despite Oil Price Spike and Hawkish Fed Outlook

The Indian Rupee has gained strength against the US Dollar despite the impact of rising oil prices and hawkish Federal Reserve expectations. The USD/INR exchange rate slipped towards 96.50 as the Reserve Bank of India (RBI) intervened in both the spot and non-deliverable forwards markets to support the domestic currency.

A Reuters report suggested that the RBI was selling US dollars around the 96.80 level, with state-owned banks offering dollars on behalf of the central bank. The RBI's intervention aimed to cushion the Rupee, but market participants expect this support to be temporary due to stronger oil prices and a renewed shift towards rate hikes at the Federal Reserve.

The global energy supply has been disrupted by heightened tensions between the US and Iran, with Yemen's Houthi group shutting the Bab el-Mandeb Strait. This has led to higher crude prices, which have unsettled inflation expectations and revived speculation about a potential rate hike at the Fed's next policy meeting.