RBI: The Reserve Bank of India’s (RBI) ongoing intervention caused the Indian rupee to rise from fresh lows for the second straight session on Monday.
After ending at 89.65 versus the US dollar on December 19, the currency started 24 paise higher at 89.41.
In the middle of the rupee’s rebound, analysts pointed out that volatility is still the primary concern and that the RBI’s actions and global dollar movements would be essential in the near future.
According to currency market observers, 89.20 has become a critical milestone, and a persistent breach below this might lead to the 88.50–88.30 range in the near future.
Foreign portfolio investors selling dollars and buying Indian stock in November, as well as the reduced trade imbalance, may have contributed to the rupee’s increase.
The rupee was the best-performing currency among its Asian counterparts on Friday, having gained 0.67 percent in a single day and surpassed the psychologically significant 90-mark versus the US dollar before ending down.
While domestic flows bolstered equities markets and bond rates toughened in November, the Indian rupee was impacted by consistent selling by foreign institutional investors (FIIs).
As the goods trade deficit decreased from a sharp $42 billion deficit in October to $24.5 billion in November, India’s external balance improved.
According to the study, India’s external balance was still supported by its surplus of services.
In nine out of eleven trading days in December, FPIs were net sellers. According to a recent research by Bank of Baroda, the rupee could continue to fluctuate until an agreement with the US is achieved, which might happen by March 2026.
According to the Bank of Baroda research, changes in the forwards sector, spot RBI interventions, and FPIs are important factors in explaining currency fluctuations.
The bank said that daily capital flows like foreign direct investment and external commercial borrowings, as well as daily current-account flows like IT revenues or remittance payments, also impact the market but are not recorded on a daily basis, limiting direct correlation to rupee movements.
