Rupee Strengthens Against US Dollar, Opens at 96.30

Rupee Opens Stronger Amid Sharp Correction in Crude Oil Prices

The rupee opened 52 paise stronger at 96.30 against the US dollar on Thursday, 21 May, supported by a sharp correction in crude oil prices. This correction also eased pressure on US Treasury yields, a major concern for the domestic currency in recent sessions. Despite the recovery, the rupee remains on a nine-session losing streak, having declined 2.5% during the period while repeatedly hitting fresh record lows against the dollar.

A Reuters report notes that any decline in the dollar-rupee pair is likely to attract buying interest from importers. Brent crude fell 5.6% on Wednesday, trading near $105 per barrel as investors tracked developments in US-Iran negotiations. US President Donald Trump indicated that negotiations are nearing completion, while cautioning that further attacks could occur if an agreement does not materialise.

The recent decline in US Treasuries came to a halt as lower oil prices alleviated inflation worries. On Wednesday, the yield on the US 10-year bond fell by almost 10 basis points, dropping below the 4.60% threshold. Indian benchmark indices opened higher on Thursday as a sharp decline in crude oil prices boosted investor sentiment amid growing optimism that the US may be nearing a deal with Iran to ease Middle East tensions.

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Lower oil prices supported risk appetite, given India’s heavy dependence on crude imports. The Reserve Bank of India has been actively intervening in the currency market by regularly selling dollars to curb excessive volatility in the rupee. Market participants estimate that the central bank has been selling close to $1 billion a day in recent sessions to support the domestic currency amid persistent external pressure.

However, experts note that such intervention also tightens domestic liquidity conditions. Banking system liquidity currently remains in a modest surplus of around ₹1.51 trillion, significantly lower than earlier comfortable levels. To manage liquidity while continuing its forex operations, the RBI has announced a $5 billion buy-sell swap auction with a three-year tenor scheduled for 26 May. This move is expected to help ease liquidity pressures in the banking system.

Amit Pabari, MD, Research Team at CR Forex Advisors, expects the 97.00 level to act as an immediate resistance zone for the USD/INR pair, while support is likely to emerge in the 95.50–95.80 range from a technical perspective. He added that the rupee is likely to remain under pressure as long as geopolitical tensions stay elevated. According to Pabari, RBI intervention measures and liquidity support may provide temporary relief and help contain near-term volatility in the currency market.

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