The Indian Rupee (INR) opened higher against the US Dollar (USD) on Friday, following the Reserve Bank of India's (RBI) move to restrict state-run oil refiners from making spot dollar purchases and instead utilize a special credit line for their foreign exchange needs [1]. This policy aims to reduce the impact of large dollar purchases by oil refiners on the domestic currency, a measure previously implemented during the Russia-Ukraine war [1]. As a result, the USD/INR pair declined to near 92.80 after a period of sideways trading, and the pair is currently trading below the 20-day Exponential Moving Average (EMA) at 93.06, indicating a mildly bearish near-term bias [1].
The RBI has also taken additional steps to stabilize the rupee, including a directive in late March for banks to cap their net open rupee positions in the foreign exchange market at $100 million by the end of each business day [1]. Meanwhile, capped WTI Oil prices around $90, after previously surging above $100, have provided further support to the rupee, as lower oil prices benefit economies like India that rely heavily on oil imports [1].
Market sentiment is broadly risk-on, bolstered by US President Donald Trump's optimistic statements regarding a potential deal with Iran. Trump expressed that a deal is 'very likely' and that Iran is now 'more willing to do things today they previously weren't,' such as giving up nuclear ambitions and handing over enriched uranium [1]. However, he also warned that military actions against Tehran would resume if a deal is not reached [1]. This upbeat sentiment has diminished the safe-haven appeal of the US Dollar, with the US Dollar Index (DXY) trading marginally higher near 98.25 but set for a consecutive negative weekly close [1].
Foreign Institutional Investors (FIIs) have started to return as net buyers in the Indian equity market since the announcement of a two-week ceasefire between the US and Iran on April 8, increasing their stake by Rs. 1,048.51 crore over the last two trading days. However, this investment remains significantly lower than the selling pressure observed before the ceasefire [1].
CONCLUSION
The RBI's restriction on spot dollar purchases by oil refiners and the introduction of special credit lines have strengthened the Indian Rupee, supported by capped oil prices and improved market sentiment. While FIIs have resumed net buying in Indian equities, the scale remains modest compared to previous outflows. Overall, the measures have provided short-term stability to the rupee and Indian markets.