India rupee slide slows as lower U.S. yields ease pressure

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India rupee slide slows

Highlights

The Indian rupee closed at 96.78 per dollar on Thursday, just shy of May's lifetime low of 96.96, with RBI intervention capping further declines.
Brent crude surged 4% Thursday to near $106 a barrel before retreating after statements from U.S. President Trump eased geopolitical tensions.
Softer U.S. Treasury yields and a weaker dollar provided short-term relief for the rupee, but sustained high crude prices and capital outflows continue to exert downward pressure.

Market moves and RBI intervention

As reported by Reuters, the rupee is expected to open largely flat after closing at 96.78 per dollar on Thursday, remaining close to the lifetime low of 96.96 touched in May.

Traders said the Reserve Bank of India's intervention helped prevent the currency from breaching that mark on Thursday. They expect the central bank to keep leaning against any move below that level because a fresh record low could intensify pressure on the already struggling rupee and reinforce bearish sentiment.

The RBI has been a regular presence in the foreign exchange market over the last several sessions. Still, persistently high oil prices, portfolio outflows and higher U.S. Treasury yields continue to weigh on the Indian currency.

The rupee has come under added pressure since the RBI's policy decision on Wednesday, weakening beyond key levels. One currency trader at a bank said it is only a matter of time before the rupee breaks 97 and possibly falls further, adding that a new low could come as soon as today.

Global factors shape near-term outlook

U.S. Treasury yields fall on Thursday despite rising oil prices, with analysts attributing the move to safe-haven demand amid a decline in U.S. equities and a well-received Treasury auction. The dollar index also slips alongside yields, while Asian currencies inch higher.

Brent crude climbs 4% on Thursday and reaches an intraday high near $106 a barrel. Prices later cool after U.S. President Donald Trump says Washington will not attack Iran before next month's U.S. elections, citing productive talks to halt the war.

For India, the combination of softer U.S. yields and a weaker dollar offers some near-term relief, but the broader backdrop remains difficult. As long as crude stays elevated and capital outflows persist, pressure on the rupee is likely to remain even if central bank intervention slows the pace of decline.

In our earlier article on direct U.S. Treasury market intervention, we explained that official action can act as a short-term circuit breaker—stabilising smaller markets like Argentina’s peso—but tends to lose effectiveness when it fights deeper fundamentals. We also noted that efforts to influence big, liquid markets such as U.S. sovereign yields or Japan’s yen can quickly fade as borrowing needs, yield pressures and investor positioning reassert themselves, raising the risk of volatility if intervention becomes routine.

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