Indian Rupee Expected to Remain Range-Bound Amid Central Bank Intervention and Portfolio Inflows

The Indian rupee is poised for a subdued trading session, continuing a trend that has made it one of Asia's quietest currencies over the past two weeks. Traders expect the central bank to continue leaning against downward pressure on the currency, while a modest pickup in portfolio inflows is anticipated to provide ongoing support.

The currency is expected to open in the 95.70-95.75 range against the U.S. dollar, following a close of 95.7450 on Monday. Over the last fortnight, persistent interventions by the central bank have anchored the rupee within a tight range of under 30 paisa, oscillating between 95.45 and 95.75.

A trader at a state-run bank noted that any dips on the USD/INR pair continue to encounter corporate bids, while gains are firmly capped by the Reserve Bank of India. Market participants expect this pattern to persist in the near term.

Alongside central bank actions, improved foreign portfolio inflows have served as a stabilizing factor for the rupee. Overseas investors have net-purchased over $2.5 billion worth of Indian equities so far in August. This follows a net purchase of $2.1 billion last month, marking a sustained reversal following four consecutive months of substantial outflows that totaled nearly $28 billion.

Despite these supportive domestic inflows, the rupee continues to contend with several external pressures. These include sustained hedging demand from local corporates, intermittent maturities of derivative contracts, and persistently elevated global oil prices.

Meanwhile, broader Asian currencies remained mostly range-bound. The U.S. dollar struggled to retain gains against major peers as investors evaluated Washington's expanded Iran-related sanctions and ongoing discussions regarding efforts to ease pressure on longer-dated Treasury yields.

U.S. Treasury Secretary Scott Bessent announced an expansion of sanctions against Iran, while reports indicated that the U.S. Treasury could potentially utilize a portion of its cash balance to repurchase longer-dated bonds aimed at easing borrowing costs.

Commenting on the broader macroeconomic environment, financial institution MUFG noted in a research note that heightened geoeconomic fragmentation makes reserve and trade diversification a rational approach for countries seeking to reduce reliance on any single financial system, including the dollar-based framework.

"Currency stability plays a crucial role in business planning, especially for startups and enterprises engaged in cross-border trade or overseas fundraising. The recent containment of volatility in the rupee, backed by steady portfolio inflows and central bank support, offers a predictable operating environment for businesses managing foreign exchange exposure. However, founders and finance leaders must remain mindful of external macro factors such as oil price fluctuations and global liquidity shifts that continue to influence broader financial markets." — Dr. Shishir Gupta, Founder & CEO, StartupLanes