Rupee Notches Best Day Since June on RBI and Oil Tailwinds

The Indian rupee recorded its strongest session in more than six weeks on Monday, rising 0.7% as the Reserve Bank of India sold dollars and a plunge in crude oil prices triggered stop-losses on long dollar positions.

The currency opened at 96.1475 against the dollar and surged to an intraday high of 95.7950, reversing sharply from the previous close of 96.5625. It was the rupee's biggest single-day gain since June 12.

How the Rally Unfolded

The dollar/rupee pair broke below the 96.14-96.16 range and plunged to around 95.80 within minutes as the rally accelerated. Traders said several factors converged: oil prices extended their slide, the rupee breached near-term resistance levels, and the RBI's dollar selling added further momentum.

RBI's Multi-front Intervention

The central bank deployed dollar sales in the spot market alongside buy/sell swaps, which weighed on forward premiums. The one-year implied interest rate dropped roughly 10 basis points to 2.82%.

Estimates of Monday's intervention ranged from approximately $1.5 billion to $3 billion, according to three traders, with the RBI active in both spot and non-deliverable forward markets. Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, pegged the spot market intervention at around $1.5 billion.

RBI Governor Sanjay Malhotra disclosed in an interview published Monday that the central bank's measures to attract foreign currency inflows have drawn in nearly $32 billion.

Oil Prices Tumble on U.S.-Iran Détente

The decline in oil prices was fueled by a cessation of military attacks between the U.S. and Iran. Brent crude fell nearly 10% during Asian trading, slipping below $88 per barrel, as the de-escalation stripped a significant risk premium from energy markets. The drop directly benefited the rupee given India's heavy reliance on crude oil imports.

What Analysts are Saying

Dhaval Shah, founder and managing director of De-Risk Forex Consultancy, said the recent rise in USD/INR was primarily driven by higher crude oil prices. With geopolitical concerns easing, the rupee is expected to see a meaningful appreciation on a mean-reversion basis, especially relative to global and Asian currencies, according to Shah.

Additionally, inflows through the FCNR(B) scheme and continued foreign investment in domestic equity markets are providing further support to the rupee, Shah said.

A Broader Cushion

Monday's rally did not emerge in isolation. The RBI's sustained campaign to attract foreign currency, now totalling nearly $32 billion, has built a deeper buffer against external shocks. With oil prices retreating and the central bank willing to act across spot and derivatives markets, traders holding long dollar positions were caught off guard as stop-loss orders cascaded through the session.