The rupee rose 0.2% to 95.0725 per dollar after hitting a record low of 95.4325 in the previous session.
Dollar-rupee forward premiums, which reflect the cost of hedging currency exposure, fell, with the 1-year forward implied yield down 9 bps at 3.10%.
The rupee has faced persistent strain since the Iran war began, with analysts viewing oil prices as the key driver of its future trajectory, given India’s heavy reliance on crude imports.
Brent crude oil futures fell more than 1% to $108.1 per barrel after U.S. President Donald Trump said he would briefly pause an operation to help escort ships through the Strait of Hormuz, citing progress toward a comprehensive agreement with Iran.
Asian currencies were stronger across the board, with the Korean won and Japanese yen up about 1.5%. Investors were wary of further intervention from Japanese authorities after sources told Reuters last week that Tokyo had stepped in to stem the yen’s decline.
Spillovers from the Iran war have drawn multiple central banks, including the Reserve Bank of India, to defend their currencies in Asia. A notable feature of the current intervention cycle has been “the increasing use of forward-market intervention by central banks,” analysts at BofA Global Research said in a note.
“By leaning more towards forwards, central banks can alleviate immediate pressures of the direct balance sheet, while keeping intervention less intrusive for onshore liquidity conditions and largely sterilized,” the note said.
The RBI’s short forward dollar commitments, reflective of its FX interventions, ballooned to over $100 billion at the end of March, according to central bank data.
