The rupee has rebounded on Monday from the all-time low due to support from the Reserve Bank of India (RBI), said currency traders. However, sentiment remains weak due to delay in the US-India trade deal.
The Indian rupee rose 17 paise to 89.24 on Monday. It opened at 89.14 compared to the previous close of 89.48. On Friday, the domestic currency breached 89 level for the first time, hitting a record low. Followed by the defence from the RBI on Monday, rupee was the second performing currency on Monday after Singapore dollar. So far in FY26, the currency has fallen 4.42%.
What did Dilip Parmer say?
“The rupee gained the most among the Asian currencies on likely intervention from the central bank and MSCI index rebalancing related flows,” Dilip Parmer, research analyst, HDFC Securities. He added that, however, the bias remains weak for the rupee amid foreign fund outflows, widening trade deficit and stronger dollar index against the major currencies.
The dollar index has been strengthening since last week, crossing 100 mark compared to 97 in September. Market participants said that a rise in the dollar index will also weigh on currency going ahead. However, they expect the RBI to delay the 90-level break for a few more weeks.
“After the morning offshore intervention by the RBI, exporters have also turned active in order to hedge some portion of their exposure between 89.20-89.30 levels,” said a treasury head at a foreign bank. He added that importers were also seen around 89.08 levels. One-year forward premium has moved up, reflecting the demand from importers as well, said the treasury head. The RBI was active both in the spot market and non-deliverable forwards.
Malhotra’s recent comment on currency depreciation
In an interview with a TV channel on Monday, the RBI Governor Sanjay Malhotra said that the recent weakness in the currency is a natural outcome of inflation gap with advanced economies. A 3%–3.5% annual drop is typical for the currency, he said, adding that the RBI’s focus is on curb excessive volatility rather than defending any specific level.
According to Parmer, rupee has resistance at 89.50 and support at 88.80 in the near term. If a trade deal delays further, rupee may go to 90 level, said currency traders. On the other side, the currency will retrace to 88 level on an announcement of the trade deal.