Ahead of Modi-Trump meet, rupee logs biggest single-day gain in 2 years

RBI sells $12 bn in 2 days to lift rupee

The rupee surged against the greenback on Tuesday following aggressive intervention by the Reserve Bank of India (RBI) through dollar sales, according to market traders. This comes just ahead of Prime Minister Narendra Modi’s meeting with US President Donald Trump.

 

The RBI is speculated to have sold around $8 billion on Tuesday, pulling the Indian unit below the 87 per dollar mark and triggering an appreciation of 0.74 per cent. It was the best-performing Asian currency for the day.

 

Foreign exchange dealers said state-owned banks, acting on behalf of the RBI, likely sold around $12 billion over the past two trading sessions.

 

 

The rupee climbed to 86.64 against the dollar during the session, marking its biggest single-day gain in nearly two years, since March 23, 2023. It settled at 86.83 per dollar, compared to the previous close of 87.43.

 

“Our estimate is around $12 billion over Monday and Tuesday combined. This would likely be one of the largest interventions (by the central bank)," said the treasury head at a private bank. “Honestly, no one expected this level of intervention — it seems like a precaution ahead of the Modi-Trump meeting. If things don’t unfold as expected, at least the rupee won’t immediately shoot up to 89 per dollar.”

 

Energy sourcing from the US could be on the agenda during the Modi-Trump talks, petroleum ministry officials hinted. 

 

In a surprise move on Monday evening, the central bank doubled the amount of government bonds it plans to buy in an open market operation scheduled for Thursday. The move is now seen as a measure to compensate for rupee liquidity drained from the foreign exchange market due to dollar sales. As a result, dealers expect more OMOs in the near future.

 

The rupee has depreciated by 3.94 per cent in the current financial year and 1.40 per cent in the current calendar year. So far in February, it is down 0.24 per cent against the dollar.

 

“This surge was fuelled by significant RBI intervention, with the central bank selling dollars to support the currency amid global market volatility and continued foreign institutional investor outflows. While these measures are expected to stabilise the rupee in the near term, erratic statements from Trump could trigger short-term fluctuations,” said Abhishek Goenka, CEO of IFA Global.

 

Meanwhile, the dollar index remained steady at 108.30 on Tuesday, tracking the greenback’s strength against a basket of six major currencies.

 

Market participants said increased volatility will deter heavy speculative trading against the domestic currency in the coming sessions. “People might avoid taking heavy positions for now. We expect volatility on Wednesday as well as Trump has hinted at imposing ‘reciprocal tariffs’ on imports from all nations,” said a dealer at a state-owned bank.

 

The rupee has depreciated 2.94 per cent against the greenback since November 6, 2024, the day US presidential election results were announced, largely mirroring the 2.4 per cent appreciation in the dollar index over the same period.

 

The rupee breached the key 87 per dollar mark on February 4 as the dollar strengthened after Trump imposed tariffs on Canada, Mexico, and China. Tariffs on Mexico and Canada were later paused for a month.

 

The domestic unit declined from 86 to 87 per dollar in 15 trading sessions. The move from 85 to 86 took 16 sessions, while depreciation from 84 to 85 occurred over 46 working days. The slide from 83 to 84 stretched over 478 days.