India moves oil-dollar demand off market to support the rupee

India’s central bank is taking an unusual two-part approach to a rupee that closed Friday at 96.73 per dollar, close to its May record low. From Monday, it will sell dollars directly, through designated banks, to Indian Oil, Hindustan Petroleum and Bharat Petroleum instead of leaving their large daily purchases to compete in the open currency market. Oil imports are one of India’s biggest recurring sources of dollar demand, so moving those purchases off-market could calm trading even though the underlying demand remains and the dollars will come from the central bank’s reserves. The bank also tightened rules around rupee-linked derivatives—contracts used to manage or take currency risk—barring canceled trades from being rebooked and requiring a risk reserve for some positions. The measures aim to curb volatility and speculation, not remove the economic pressures weighing on the currency.