The Indian rupee bounced back sharply on Thursday due to likely intervention from the Reserve Bank of India (RBI), following its record low in the previous day, said traders.
The domestic currency ended 55 paise or 0.60% up to 91.60 against the dollar after hitting an intra-day high of 91.41, emerging as Asia’s top-performing currency. On Wednesday, the currency had declined to a record low of 92.15 after the West Asia war intensified, which led to a spike in crude oil prices.
Countering Speculation
The RBI likely intervened aggressively through its dollar sales to cut speculation positions, according to currency dealers. So far in FY26, the rupee depreciated 7.18%, the highest in three years.
“They (RBI) were continuously intervening around 91.64-91.65 level,” said a chief dealer at a private sector bank. He added that further movement of the rupee will depend on the RBI action. “If RBI is not protecting these levels, the rupee will move back to the 92 level,” the dealer said.
“The RBI action was not surprising. The central bank’s aggressive dollar sales aimed to cut the speculative positions built in the market. They even intervened in the offshore market during pre-market hours,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP.
He added that, however, the overall trend would be towards weakening. “Sustaining at the 91 level would be tough as geopolitical tensions between the US-Israel and Iran persist, driving oil prices higher, while the dollar index has strengthened.” The crude oil prices are still elevated at $83.3 per barrel.
Geopolitical Headwinds
“An extended conflict will lead to further global risk aversion (higher FPI outflows and safe-haven demand for gold), further pressuring the rupee. While the RBI is likely to intervene in the FX market, adverse global events are likely to keep the rupee under near-term pressure,” according to Emkay Global Financial Services.
“Should the conflict extend beyond a few weeks, rupee is likely to drift toward 95. However, a relatively quick end to the conflict could see oil prices reverse and help recover USD/INR to sub-91 levels.”
Unless there is clarity on geopolitical uncertainties, such as readiness for negotiations, the domestic currency will continue to face downward pressure, said market participants. They expect the rupee to trade in the range of 91-93 in the near-term.
