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RBI support for rupee seen as oil risk curbs carry appeal
BNY says the rupee is underheld versus earlier in the year and that Brent above $95 could prompt further FX intervention, as higher crude pressures external balances.
BNY’s Geoff Yu said India’s central bank, the RBI, has stepped in to support the Indian rupee as rising energy costs threaten the country’s external balances and increase FX volatility.
The note argues that the rupee’s carry appeal could improve if conditions stabilize, but higher oil prices are seen acting as a drag on the currency’s outlook. iFlow data in the commentary indicates INR is currently underheld versus earlier in the year, after holdings briefly turned positive following a ceasefire confirmation but did not hold.
BNY also cited a trigger for action, saying Brent moving above $95 is viewed as a clean trigger for intervention. The commentary added that higher crude has pushed governments and central banks back into defense mode, even without a fresh coordinated release of oil stocks.
Latest closeWTI crude $87.52 ▲3.1%|Brent $94.43 ▲3.8%