Rupee rebounds 22 paise in early trade as RBI intervention offsets oil shock

The rupee recovered 22 paise against the US dollar in early trade on Friday, with likely intervention by the Reserve Bank of India (RBI) helping the domestic currency rebound after it slid to a record closing low in the previous session.

The local unit opened at 96.81 against the US dollar in the interbank foreign exchange market before strengthening to 96.51, up 22 paise from Thursday's closing level of 96.73.

Market participants attributed the recovery largely to RBI intervention through state-owned banks, which helped offset pressure from surging crude oil prices and continued foreign capital outflows.

The rupee had weakened sharply on Thursday as escalating tensions in West Asia pushed global crude oil prices above the USD 100-a-barrel mark, raising concerns over India's import bill and inflation outlook.

Brent crude, the global benchmark, was trading at USD 100.8 a barrel in futures trade on Friday, extending gains after geopolitical tensions intensified.

The latest escalation followed fresh US military strikes on Iran and attacks by Yemen's Houthi rebels on two Saudi oil tankers in the Red Sea, fuelling fears of disruption to global energy supplies.

“The key factors for the weak opening of the rupee were Brent crude remaining elevated, increasing dollar demand from Indian oil marketing companies, while importer dollar buying remained strong through the session. RBI intervention via state-owned banks prevented a much larger depreciation, while the softer dollar index provided only limited support,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

The US dollar index, which measures the greenback against a basket of six major currencies, was marginally lower at 101.43, offering limited support to emerging market currencies, including the rupee.

Domestic equities also remained under pressure. The BSE Sensex fell 512.07 points to 75,869.38 in early trade, while the NSE Nifty declined 153 points to 23,713.60, marking the fifth consecutive session of losses.

Foreign institutional investors (FIIs) continued to weigh on market sentiment, selling equities worth Rs 2,999.23 crore on a net basis on Thursday, according to exchange data.

With PTI inputs