US and Japan Joint Intervention Boosts Indian Rupee

The Indian rupee surged following a coordinated US dollar-selling intervention by the United States Department of the Treasury, the Ministry of Finance of Japan, and South Korea. This operation marked the first joint effort between the US and Japan since 2011. Treasury Secretary Scott Bessent stated that the US will not hesitate to conduct further joint operations to stabilize markets.

To manage the volatility and deter speculative bets, the Reserve Bank of India implemented strategies to increase foreign currency reserves through special windows and FCNR(B) deposits. These facilities attracted $40.81 billion as of July 31, with some projections suggesting total mobilizations could reach $100 billion. While the central bank is tolerating gradual depreciation, it continues to manage the currency through swap facilities.

By August 4, the rupee opened flat around 95.33 to 95.34 against the dollar. This stability resulted from a balance between a weaker US Dollar Index and increased demand from Indian importers hedging payments. Sentiment was further supported by falling crude oil prices and the decision by President Donald Trump to call off a planned military strike on Iran, although Iran denied that any negotiations are currently taking place. Markets are now awaiting the Reserve Bank of India's monetary policy meeting, where the repo rate is expected to remain unchanged.