Due to probable Reserve Bank of India (RBI) action to stop the precipitous slide in the currency, the rupee rebounded dramatically from its record low level on Thursday to close at 89.90 versus the US dollar.
Rupee Recovers After Slump
The local currency closed at 89.90 versus the US dollar, up 29 paise from the previous close of 90.19. During the intraday trading, the rupee opened at 90.36 but fell to a new all-time low of 90.43.
The Indian rupee strengthened vs the US dollar, ending a six-day losing trend. The unwinding of speculative holdings and probable central bank assistance are the main causes of this upturn, according to Dilip Parmar, research analyst at HDFC Securities.
According to FX market observers, the RBI’s involvement in the spot market was visible between the 90.30 and 90.40 levels.
RBI Actions Steady Rupee
Market players conjectured that the RBI could have carried out a sell-buy swap, which helped reduce volatility without completely depleting reserves while also supplying dollars in the spot market. According to Dipti Chitale, CEO of Mecklai Financial Services Pvt Ltd, “this intervention boosted the rupee off its record lows.”
As interest deferential and hedging demand climbed, forward premiums kept rising.
The dollar index (DXY) also declined as traders started factoring in the anticipated Fed rate drop for next week. The rupee’s rebound was further aided by the worldwide dollar’s decline, she said. The DXY, which measures the strength of the US dollar relative to a basket of six currencies (the euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona), dropped to 98.78 on Thursday from its previous closing of 98.85.
Foreign Outflows Pressure Rupee
Parmar of HDFC Securities claims that the rupee’s fundamental bias is still unsupportive due to persistent inflows of foreign funds and a large trade imbalance. Foreign portfolio investors (FPIs) sold domestic stocks for Rs 4,752.4 crore on Thursday, up from Rs 4,033.46 crore the day before.
According to statistics from the National Securities Depository Ltd (NSDL), foreign investors have sold local shares worth Rs 13,121 crore so far in 2025.
According to Parmar, the spot USD/INR pair will next encounter technical resistance around 90.45 and support at 89.70.
Market players will be paying careful attention to what Reserve Bank of India Governor Sanjay Malhotra says about the rupee in his policy speech on Friday, December 5.
