Rupee Recovers From Two-Week Low as Oil Prices Ease and Traders Await Key US Inflation Data

The rupee came under pressure early in the session, while traders watched oil prices, central bank activity and overseas developments for clues to the currency’s next move and the wider market direction abroad.

The Indian rupee recovered from a two-week low to close almost unchanged on Thursday, as suspected Reserve Bank of India intervention and lower oil prices helped offset demand for dollars, traders said.

The rupee settled at 95.26 per dollar, compared with Wednesday’s close of 95.22. It had weakened earlier in the session to its lowest level since October 12, facing concentrated dollar demand around the RBI’s daily reference rate and increased interest among interbank traders in taking short positions against the currency.

Traders said likely intervention by the central bank limited the rupee’s losses. The pressure eased later as the flow-linked demand for dollars faded, while softer crude prices offered additional support to the Indian currency.

Oil prices slipped as hopes of renewed peace talks reduced some concern about possible disruptions to Middle East supplies amid escalating regional conflict. The Wall Street Journal reported on Wednesday, citing US officials and people familiar with the matter, that US Vice President JD Vance had sent a letter to Iranian Security Council chief Mohsen Rezaei in an effort to revive negotiations.

Oil retreat lifts stocks and bonds

The benchmark Nifty 50 index ended about 1% higher, while the yield on India’s 10-year benchmark government bond fell by eight basis points to 7.35%. The moves came as lower oil prices eased pressure across domestic markets.

The rupee’s recovery was limited, however, with the currency finishing close to its previous session’s level after earlier losses. The dollar remained slightly stronger against a basket of currencies, with the dollar index up 0.1% at 102.26.

Other Asian currencies gained between 0.1% and 0.3%, while regional stock markets traded unevenly. Investor responses to artificial intelligence-related earnings announcements were mixed, leaving markets watching for results from Amazon and Intel later on Thursday.

Attention was also turning to the United States personal consumption expenditures inflation report, a closely watched release that could offer clues about the future direction of interest rates.

ING said it expected September core PCE inflation to rise 0.3% month on month, in line with consensus expectations. The bank said that reading would reinforce the picture of persistent inflation and forecast a modest positive reaction for the US dollar following the release.

The data could influence expectations for US interest rates and, in turn, shape currency trading. For the rupee, Thursday’s session showed how dollar demand and central bank activity can drive short-term moves, while changes in oil prices can offer relief to a market sensitive to energy costs.

The currency had come under pressure early in the day as dollar buying gathered around the RBI’s reference rate and traders increased bets on further rupee weakness. Suspected central bank support helped contain that slide, and the easing of oil prices provided another source of support before the close.

With the rupee ending at 95.26 per dollar, traders’ attention shifted to the US inflation figures and their potential effect on the dollar. Market participants were also monitoring developments around the reported effort to restart US-Iran peace negotiations, which had helped pull oil prices lower.