Rupee Nears Record Low Against the Dollar Before RBI Intervention

The Indian rupee fell to its low for the day against the US dollar before recovering, as intervention by the Reserve Bank of India (RBI) kept it from falling to a new low. State-run banks sold dollars and inflows from foreign investors helped the currency recover, according to the Economic Times.

The pressure came from two directions at once. High oil prices raised the cost of India's crude imports and increased dollar demand from importers, while a firm dollar backed by high global yields drew capital toward US assets. Brent's weekly gain made the import bill heavier through the week.

India imports the large majority of its oil, so a Gulf conflict that raises crude feeds directly into its trade balance and its currency. The central bank's willingness to spend reserves defending the rupee shows how closely external shocks and domestic monetary policy are now linked.