The Indian rupee was little changed around 92.9 per USD in thin holiday trading, consolidating recent gains but remaining on track for a strong weekly advance, supported by tighter central bank curbs on speculative activity. The currency’s rally has been driven by a series of Reserve Bank of India measures to rein in speculative FX trading, including new restrictions on forward transactions and stricter limits on banks’ foreign exchange exposures. These actions have prompted dollar selling in the onshore market and lent support to the rupee, while simultaneously tightening hedging conditions and widening the spread with offshore prices.
Sentiment was further underpinned by optimism that traffic through the Strait of Hormuz could partially resume. Iran and Oman are reportedly working on a protocol to “monitor transit” through the key shipping lane, in a bid to ease regional tensions. At the same time, India and other nations are actively engaging with Tehran to secure safe passage for vessels, while forming small diplomatic groupings and exploring barter-style arrangements to facilitate trade.
