The Indian rupee climbed, extending its biggest rally in 12 years after the central bank doubled down on curbing speculation against the local currency.
The rupee rose 0.3% to 92.8363 to a dollar on Monday, adding to the 1.8% jump on Thursday, the steepest since September 2013. It may gain further toward the 91.50—92 range as banks unwind their dollar positions ahead of the April 10 deadline, said Amit Pabari, managing director at CR Forex. Local markets were shut for the Good Friday holiday.
The rupee swung sharply in a holiday-shortened week after the Reserve Bank of India unleashed measures to restrict banks in the onshore forward market. It capped net open positions at $100 million, sparking a rush to unwind trades. The authority later barred banks from offering non-deliverable forwards — the most widely used offshore rupee instrument — and took steps to prevent traders from rolling over speculative wagers.
The rupee had been hitting successive lows despite repeated intervention by the RBI, with pressure intensifying after the Iran war drove up India’s fuel import costs. The unit has tumbled 8.2% over the past year, making it Asia’s worst-performing currency. Efforts to defend the rupee led to $40 billion drawdown in the foreign-exchange reserves over the past four weeks.
The measures come days before the central bank’s rate decision on Wednesday, its first review since the Iran war began. The focus will be Governor Sanjay Malhotra’s view on the rupee as the curbs have left lenders — the biggest component of India’s stock market — dealing with losses and operational headaches.
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Some analysts, however, expect the rupee to give up gains if the Iran war is prolonged.
“I expect the INR to weaken to 96, barring further RBI intervention, if the Iran war stretches on, which is likely to keep oil prices elevated for at least a quarter,” said Apoorva Javadekar, chief economist at Muthoot Fincorp Ltd.
Still, the rupee may not be Asia’s worst-performing currency, given that Thailand, South Korea and Singapore have a higher reliance on energy imports, especially from the Middle East, he said.