Rupee Climbs to 94.96 as RBI Curbs Dollar Demand

The rupee reached ₹94.96 per dollar on Tuesday, rising beyond its opening rate of ₹95.16. It extended a two-day rebound after the Reserve Bank of India stepped in to ease pressure on the currency. The move followed a 93-paise gain on Monday, its biggest single-day rise in more than six months. For importers and investors, the sharp turn offered relief, but did not prove the fall had ended. ^9,10

The rebound followed a package of RBI steps aimed at reducing demand for dollars in the open market. The central bank created a special dollar supply route for three state-run oil firms: Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation. Their dollar needs can be met through designated banks, instead of relying only on the spot market. The RBI also barred users from rebooking cancelled rupee-linked currency contracts and tightened rules on some trades. ^10,17

The oil firms’ route could shift an estimated $10 billion to $12 billion in monthly dollar demand away from the spot market, where heavy buying can weaken the rupee. New rules also make some hedges more costly, especially for importers buying protection against further falls. An ICICI Bank report said higher costs could discourage excess hedging and cool dollar demand. But the currency remains down about 5.5 per cent this year, while foreign investors sold Indian shares worth ₹1,708.48 crore on Monday. ^1,10,11

The gap between the quick rebound and the rupee’s wider weakness is why analysts warn that RBI steps may offer near-term support, not a lasting fix. SBI Research said high oil prices, strong US bond yields and foreign investor outflows could limit gains. It expects the rupee could test 94.50 in the short term. Oil prices and investor flows will remain key signs of whether dollar demand actually eases. ⁸