The Reserve Bank of India (RBI) has likely intervened in the foreign exchange market on Wednesday to limit the rupee's fall, according to four traders who spoke to Reuters. The rupee closed at 95.71 per dollar, down 44 paise from its previous close, as of latest reports. State-run banks were spotted offering dollars near the 95.80 mark, a trader at a Mumbai-based bank confirmed to Reuters. "The RBI likely sold dollars at 95.80, capping further losses," said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP, as reported by The Financial Express. This intervention comes as oil prices rose 2.34% to $98.25 per barrel on Wednesday, extending gains from the previous session after renewed US-Iran attacks pushed oil prices higher. The intervention represents a significant development in the RBI's approach to currency stability amid escalating geopolitical tensions.
Oil prices rose 2.34% to $98.25 per barrel on Wednesday, extending gains from the previous session after renewed US-Iran attacks pushed oil prices higher. According to The Financial Express, "Buying pressure was driven mainly by demand from oil importers and FPIs. Renewed Middle East hostilities pushed oil prices higher and led to a decline in the currency." The currency weakened to a low of 95.80 against the dollar before settling at 95.71, as of latest reports. The rupee has surrendered most of its earlier gains during the past two weeks, with the bulk of depreciation happening after the onset of the West Asia war in late February. In 2026 so far, the domestic currency declined 6.5%, with the bulk of depreciation happening after the onset of the West Asia war in late February, making the rupee the second worst-performing Asian currency in 2026. Over the past one year, the rupee has fallen 10.4%, highlighting the sustained pressure from geopolitical uncertainties.
Foreign investors pulled nearly $600 million from Indian equities on Wednesday, according to preliminary data, after about $3 billion of outflows in the prior three days. The research firm observed that the rupee's weakness appears to be driven not only by global dollar strength but also by risk aversion linked to the ongoing conflict in West Asia and large foreign portfolio outflows from Indian equities. SBI Research noted that foreign exchange reserves have declined by about $47 billion since February 27, 2026, but still remain around $680 billion, providing the RBI with sufficient room to intervene when required. The report emphasized that India's FX reserves are optimally sufficient to combat the unidirectional slide of the rupee. The pace of June outflows has already nearly matched May's total, highlighting the sustained pressure from foreign investors.
The Indian rupee extended gains for the second consecutive week, appreciating by 70 paise to settle at 95.00 against the U.S. dollar, compared with 95.71 in the previous week. According to the latest government economic review, this recovery has emerged as an unexpected advantage for India's exporters, with the currency depreciating about 10% against the US dollar in FY26 and weakening a further 4.9% after the onset of the West Asia conflict. The real effective exchange rate (REER) stood at 92.72 in April 2026, marking the lowest level in more than a decade and well below the benchmark level of 100. As per the Economic Survey 2025-26, a 1% depreciation of the rupee could improve India's merchandise trade balance by 1.45% over the medium term. The currency depreciation had previously made international diversification increasingly attractive to Indian investors, with the rupee crossing 95.78 against the dollar on 28 May 2026, marking a roughly 12% decline in a year. Market experts now believe the worst of the rupee depreciation may be behind us, with chances of recovery toward the 92-93 range if geopolitical tensions ease and foreign selling slows down.
Bloomberg reported on Wednesday that the government may announce measures as early as this week to attract more foreign investment, including tax cuts and lifting ownership limits on certain bonds. According to The Financial Times, India is set to remove capital gains tax on foreign portfolio investments in government securities to attract overseas capital. "The rupee, however, may be supported by expectations of measures to bolster the currency amid the fallout from the U.S.-Iran conflict," said a currency trader at a private sector bank. "The combination of equity outflows and what appears to be the most serious flare-up since the U.S.-Iran ceasefire reignited the uptrend in dollar/rupee," the trader added. In the near-term, currency traders and analysts expect the rupee to trade in the range of 95-96. Market participants now await the outcome of the monetary policy committee meeting, which is scheduled to be announced this Friday. They expect the RBI to announce some measures to support the currency, though the majority of the participants are not of the view that RBI should deploy a rate hike to manage the exchange rate.
