Oil prices rise combined with expectations of a Federal Reserve rate hike; Reserve Bank of India reportedly intervenes in the rupee market

1. According to four traders, the Reserve Bank of India may have intervened in the foreign exchange market on Tuesday, as rising oil prices and increasing bets on a Federal Reserve rate hike this week put pressure on the rupee. 2. The US dollar rose 0.4% against the Indian rupee that day, reaching 95.94 and hitting a one-month high. Traders observed that state-owned banks were selling US dollars, which is usually regarded as a sign of indirect intervention by the central bank. 3. A Mumbai bank trader stated that this round of US dollar selling was "not particularly large," and the intention was more likely to curb excessive exchange rate volatility. 4. Meanwhile, Brent crude oil most recently rose 1.4% to $107.65 per barrel. Traders also pointed out that the Reserve Bank of India may have conducted USD/INR sell/buy swap operations, marking the fourth consecutive trading day of using the swap tool to absorb excess rupee liquidity.