Rupee recovers from near all-time low on likely intervention by RBI

The local currency settled almost flat at 88.68 per dollar against the previous close of 88.69 per dollar after a choppy trade during the day

The rupee on Monday recovered from near its all-time low due to likely intervention by the Reserve Bank of India (RBI), said dealers. In the latter half of the day, reports that an Indian trade delegation will visit the US this week provided some sentimental support to the currency.

 

The local unit settled almost flat at 88.68 against the dollar, compared with the previous close of 88.69 per dollar, after a choppy trading session.

 

“There was some news about trade talks with the US, and the RBI has been holding the rupee from breaking 88.80 per dollar level for more than a week now,” said a dealer at a state-owned bank. “If the level breaks, it might go up to 89 per dollar mark or even beyond,” he added.

 

The rupee traded in a band of 88.58 per dollar and 88.80 per dollar, as trade discussions between the US and India remained in focus. 

 

“With Fed rate cuts looming and supportive signals from India’s trade fronts, the rupee has several tailwinds. Yet, a lingering cloud remains, the India-US trade negotiations, which have seen little concrete progress. Until a breakthrough occurs, the rupee may continue to face intermittent pressure, limiting its upside,” said Amit Pabari, managing director at CR Forex.

 

The local currency has depreciated by 3.63 per cent in the current financial year, whereas in the current calendar year it has witnessed 3.47 per cent depreciation.

 

Market sentiment remains sensitive to developments in India-US trade relations, with any related news triggering volatility in the currency. The rupee’s recent weakness reflects external pressures from a stronger dollar, supported by safe-haven demand, alongside domestic factors being managed by the central bank, said market participants.

 

Meanwhile, the real effective exchange rate (REER) remains below its long-term average, indicating limited downside for the rupee. Market participants are closely tracking developments around US fiscal policy, and FPI flows for cues on the next movement in rupee.