India’s Rupee Advances Most in Asia as RBI Supports Currency

Bundles of 500 rupee banknotes at a currency exchange in New Delhi, India, on Saturday, Aug. 30, 2025. The Indian rupee slumped to a record low versus the dollar on concern that 50% US tariffs will hurt the country's economic growth and corporate earnings. Photographer: Prakash Singh/Bloomberg Photo by Prakash Singh /Bloomberg

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(Bloomberg) — India’s rupee advanced the most in Asia on Thursday as the central bank stepped in to shore up the currency after it weakened to a record low in the previous session.

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The currency gained as much as 0.7% to 91.5112 per dollar after the Reserve Bank of India sold the greenback in both offshore and onshore markets, according to people familiar with the developments. 

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The central bank’s move comes as Asian markets earned a partial reprieve from Wednesday’s broad selloff sparked by an escalation in the Middle East conflict. The rupee had been under pressure since the war in Iran broke out, with the sky-rocketing energy prices threatening to widen India’s trade deficit and stoke inflation.

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“The RBI has intervened on a day when other cues are also positive — crude has stabilized, equities are slightly positive, and dollar index has also eased,” said Dilip Parmar, currency analyst at HDFC Securities Ltd. In this backdrop, the RBI’s move will lead to hefty gains for the rupee, deterring speculators, he said. 

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Moves in the currency options market on Thursday underscored the impact of the central bank’s steps. The 25-delta three-month risk reversal — a gauge of demand for dollar-rupee calls over puts — slid 10 basis points, after jumping about 14 basis points in the previous session when the rupee hit a record low. A buildup in call options signals stronger demand for the greenback. 

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Thursday’s intervention is likely aimed at preventing outsized losses in the currency, which is still Asia’s worst performer so far this year, said Dhiraj Nim, forex strategist, Australia and New Zealand Banking Group.

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The central bank has regularly stepped into the foreign-exchange market over the past few months to steady the currency when it faced pressure from record foreign outflows amid high US tariffs. While those levies have now been reduced, renewed concerns over inflation and the energy import bill have renewed withdrawals from local stocks.  

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Oil extended gains as traders assessed the widening fallout from the US and Israeli war against Iran, with Brent climbing past $83 a barrel. Crude has added 12% over the first three days of the week. 

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India imports nearly 5 million barrels a day, making it the world’s third-largest oil consumer and the RBI has assumed crude prices at $70 a barrel for the October—March period in its baseline projections.

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“Should the conflict extend beyond a few weeks, the rupee is likely to drift toward 95,” says  Madhavi Arora, lead economist at Emkay Global Financial Services. 

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Still, the RBI has the firepower to defend the currency, with its near-record foreign-exchange reserves of $723 billion. The authority has carved out more flexibility to intervene in the market by altering the maturity profile of its short dollar forward book. That’s reduced the amount of dollars it must deliver over the next year, giving it room to take on fresh bets to bolster the rupee.

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“The rupee’s slide has been exacerbated by increased speculative positioning on the limits of the RBI’s ability to defend the currency – similar to patterns in recent months,” wrote analysts from Oxford Economics, including Alexandra Hermann and Yash Adwani. “The fundamentals don’t justify the rupee’s underperformance.”

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READ: RBI Creates Intervention Space as Rupee Faces Renewed Strain

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(Updates throughout.)

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