Rupee Strengthens After 10-Day Slump Amid Speculated RBI Intervention

The Indian rupee demonstrated a notable rebound against the US dollar on Thursday, marking a significant recovery after a consecutive ten-day decline. Closing at 96.20 per dollar, the rupee’s rebound was primarily fueled by considerable interventions from the Reserve Bank of India (RBI), with estimates indicating that state-run banks sold approximately $4-5 billion to support the currency. The market also reacted positively to discussions surrounding potential interest rate hikes, which played a crucial role in enhancing the rupee’s attractiveness compared to other currencies in the region. This uplifting performance contrasts sharply with the rupee’s recent struggles, where it had dipped to concerning levels in the forward market, breaching the psychologically significant 100 per USD threshold.

Central bank interventions were evident even before the domestic markets opened, driving the rupee’s strength from around 96.75 to an opening price of 96.30. Throughout the trading day, the currency fluctuated within a range of 95.99 to 96.50 as importers capitalized on stronger rupee levels to purchase dollars. However, market experts, including Anil Bhansali and VRC Reddy, cautioned that despite this strong performance, underlying challenges remain pervasive. Persistently high oil prices and continued foreign portfolio investment (FPI) outflows are likely to keep downward pressure on the rupee, suggesting that its recent gains may not be a sustainable trend without further supportive measures in the economy.

Looking ahead, analysts predict a volatile future for the rupee, with DBS Bank forecasting a trading range of 95 to 100 through the remainder of 2026. The recent strengthening of the rupee could offer temporary relief; however, persistent factors such as high crude oil prices—evidenced by a Brent crude rise to $106.4 per barrel—could negate these gains. Market sentiments emphasize a cautious perspective, highlighting that while any positive economic developments might lead to an appreciation of the rupee, the interplay of global and domestic factors remains critical in determining its trajectory. Overall, the RBI’s active role in the currency markets, alongside potential interest rate hikes, signals a proactive approach to stabilizing the rupee amid ongoing economic challenges.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)