After approaching close to 97/$ during the week, the rupee staged a smart comeback in the last two days to become the best-performing Asian currency this week, due to heavy intervention by the central bank in both the spot and forward markets. A fall in crude oil prices also helped the currency’s fortunes. The Indian unit gained 0.29 per cent against the dollar this week, and 1.2 per cent in the last two days.
The domestic currency settled at 95.69 per dollar on Friday against the previous close of 96.20 per dollar, a gain of 0.53 per cent. However, in May so far, the rupee weakened 0.81 per cent against the dollar.
“With its aggressive intervention, RBI has created a USD glut in the banking system,” said Abhishek Goenka, founder and CEO, IFA Global.
According to dealers, RBI is estimated to have sold around $2 billion to $3 billion on Thursday and Friday each through large state-run banks, helping the local currency strengthen beyond the 96-per-dollar mark.
“RBI has been intervening aggressively in both onshore as well as offshore markets yesterday and today. It has intervened with a lot of intent. It has managed to crush short-term speculators with this move,” Goenka said.
Apart from intervention, lower crude oil prices also supported the rupee after concerns over escalating geopolitical tensions eased, reducing pressure from imported inflation and oil demand for dollars.
Brent crude oil prices fell to $104 per barrel on Thursday and remained around the same level on Friday, after hitting a high of $112 per barrel during the week. Sentiment improved after reports suggested that the United States and Iran had reached a final draft of a peace agreement.
The reopening of the Strait of Hormuz would be particularly beneficial for India, as trade flows with the Middle East could normalise. However, markets are awaiting the final signed agreement, with the US and Iran still divided over uranium enrichment and the proposed Hormuz toll mechanism. Even so, hopes of diplomatic progress in the Middle East supported risk sentiment.
“The Indian rupee maintained its upward momentum for the second straight day, effectively reversing the losses sustained at the start of the week. This turnaround is largely attributed to the Reserve Bank of India’s active market intervention post the announcement of its rupee buy-sell swap, alongside a reprieve in imported commodity prices as geopolitical risks ease,” said Dilip Parmar, research analyst, HDFC Securities. “Technically, spot rupee faces resistance at 96.20 per dollar and support at 95.40 per dollar,” he added.
Despite the recovery over the last two sessions, the rupee remains under pressure over the longer term. The currency has depreciated 10.12 per cent over the past one year and 6.08 per cent in the current calendar year so far.
Meanwhile, India’s foreign exchange reserves hit a near one-and-a-half-month low after falling $8 billion in the week ended May 15 to $688.9 billion as the central bank stepped up its intervention. The rupee depreciated 1.55 per cent during that week.
India was the biggest USD seller, both in spot and forwards, since the war began, followed by China and the Philippines, while Singapore was a USD buyer, followed by Malaysia, a Barclays report said. Total reserves declined around $39 billion after touching a record high of $728 billion for the week ended February 27, 2026.