The Indian rupee posted a modest gain on Wednesday, supported by dollar sales from the Reserve Bank of India (RBI) that helped the currency withstand upward pressure from rising crude oil prices.

During the session, the rupee traded in a range between 95.25 and 95.44 against the US dollar. The RBI's intervention through dollar sales in the foreign exchange market played a key role in maintaining stability and preventing the currency from weakening further amid elevated oil prices. The central bank's ability to step into the market draws on India's foreign exchange reserves, which rank among the world's largest and serve as a buffer against external shocks.

India imports more than 80% of its crude oil requirements, making fluctuations in global energy prices a particularly significant driver of the rupee's value. Higher oil prices increase India's import bill, widening the current account deficit and putting downward pressure on the currency.

Traders expressed optimism about the rupee's near-term outlook, citing a recent ceasefire agreement that contributed to a decline in Brent crude futures. The easing of oil prices is expected to provide additional support for the rupee in the following trading session on Thursday.

The Reserve Bank of India regularly intervenes in currency markets to curb excessive volatility and maintain orderly trading conditions, consistent with its mandate to manage exchange rate stability rather than defend a specific exchange rate level.

Source: Economic Times Markets