The Indian rupee strengthened on Wednesday, tracking gains in most of its regional peers, while dollar-rupee forward premiums declined. The Reserve Bank of India (RBI) likely conducted dollar-rupee buy/sell swaps, contributing to the rupee's appreciation.
The rupee closed at 86.3225 against the U.S. dollar, up nearly 0.3% on the day. The currency came under pressure earlier in the session but was supported by dollar-selling intervention by the RBI. In the latter half of the day, the rupee ticked up further on the back of dollar sales by foreign banks.
At least three local private banks were also spotted offering dollars, aiding the rupee. The RBI's dollar-rupee buy/sell swaps prompted a decline in forward premiums, with the 1-year dollar-rupee implied yield dropping to 2.27%, its lowest level since July last year. The central bank has been conducting such swaps routinely to manage the impact of its spot market interventions on the banking system.
An uptick in most Asian currencies also aided the rupee. The dollar index was down 0.1% to 107.9 after whipsawing over the last two days as trade tariff news flowed out of Washington.