MUMBAI, July 27 (Reuters) - The Indian rupee extended its advance on Monday, hitting a two-week high, with central bank intervention and a slump in oil prices triggering a round of stop-loss dollar selling.
The rupee climbed to 95.7950 per U.S. dollar, having settled at 96.5625 in the previous session. The currency, already buoyed by falling oil prices, saw its rally pick up pace after the dollar/rupee pair slipped below the 96.14-96.16 range and plunged to 95.80 within minutes.
Traders said several factors drove the rally. Oil prices extended their slide following the U.S.-Iran pause in hostilities, the rupee had broken through near-term resistance levels, and Reserve Bank of India intervention appeared to add momentum.
This prompted an unwinding of long dollar/rupee positions, triggering a wave of stop-loss dollar selling, the traders said.
Alongside dollar sales in the spot market, the RBI conducted buy/sell swaps, which weighed on forward premiums, per traders. The one-year implied interest rate dropped about 10 basis points to 2.82%.
Estimates of Monday's intervention ranged from roughly $1.5 billion to $3 billion, three traders said, with bankers saying the central bank was active in both the spot and non-deliverable forward markets.
Traders said the RBI likely deployed a similar strategy on Friday, selling dollars in the spot market while conducting buy/sell swaps in forwards when the rupee was at risk of sliding to an all-time low.
OIL LIFT
The decline in oil prices added to the rupee's momentum, with Brent crude sliding during Asian trading and slipping below $90 a barrel.
The U.S. ambassador to the United Nations said Washington had paused attacks to allow more time for diplomacy.
INFLOW BOOST
Sentiment towards the rupee was aided by recent RBI measures aimed at attracting foreign currency inflows and boosting the central bank's ability to counter depreciation pressures.
Dollar-mobilisation schemes announced by the RBI in June have attracted nearly $32 billion, RBI head Sanjay Malhotra told The Hindu BusinessLine in an interview published on Monday.
Reporting by Nimesh Vora; Editing by Ronojoy Mazumdar, Mrigank Dhaniwala and Sonia Cheema
Source: Reuters