The Indian rupee on Tuesday ended flat at 89.65 against the US dollar, unchanged from Monday’s close. In the afternoon session, the currency inched up slightly and was trading at 89.83 against the greenback. Analysts said the rupee has been holding ground since the central bank’s intervention, as state-run banks sold dollars aggressively.
On Friday, the currency had touched an intraday high of 89.25 due to these interventions, which also helped diminish speculative positions in the market. Traders said the rupee traded flat on Monday on the back of a softer dollar index, while foreign investors had been net sellers of domestic equities in the preceding three sessions, in contrast to earlier sessions when they were net buyers.
A report by Bloomberg said that foreign investors increased their holding of Indian stocks most in the last two months as the rupee rebounded from a record low. Overseas investors purchased $644 million of local shares, the most since mid-October, according to data compiled by Bloomberg.
“The inflows coincided with the rupee posting its biggest weekly gain in nearly six months, following nearly $1.8 billion of equity outflows over the prior three weeks when the currency slid more than 1%”, Bloomberg added in its report.
“The rupee traded flat near 89.65, moving in a tight 89.45–89.65 range as a softer dollar index around 98.45 and improved domestic risk sentiment provided support. A clear reversal has emerged after recent intervention-led buying from last week’s lows near 91, stabilising the currency for now,” Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said.
RBI intervention boosted confidence
“While the rupee may (or may not) continue to depreciate over time, these actions, which I have little doubt will be repeated as and when — and ideally when least — expected, will ensure that speculative users of the market become more circumspect,” Jamal Mecklai, CEO of Mecklai Financial, told Financial Express.
He further added that the sharp movement of Rs 1 in the currency showed that the Indian rupee was being deliberately weakened through position-taking by banks and exporters who were benefiting from the profits.
The RBI’s intervention led to a currency appreciation of 2% from its historic low of 91.08 recorded on December 16.
Analysts also added that with the materialisation of a trade deal with the US, the rupee may bounce back to the 88 level in H1FY26.
“USD/INR is expected to trade in the 89.20–90.20 range. A sustained break below 89.20 could open the door towards 88.50, while on the upside, a break above 90.10 may trigger a move higher,” Reuters quoted Amit Pabari, Managing Director at FX advisory firm CR Forex, as saying.
Outlook for rupee
“Attention is on key US data, including the PCE price index, new home sales, and weekly jobless claims, which could reintroduce volatility. Technically, support lies near 90.00, while resistance is seen around 89.25,” Trivedi added.
Further, focus will now remain on whether the US Federal Reserve cuts rates at its January meeting and whether a rate cut by the RBI is on the cards, with some currency experts confident that the RBI could deliver a quarter-point cut, bringing the repo rate down to 5% from 5.25%.
