RBI Dollar Sales Propel Rupee Below 90/$ Mark

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AuthorRiya Kapoor|Published at:
RBI Dollar Sales Propel Rupee Below 90/$ Mark
Overview

The Indian rupee strengthened past 89.88 per dollar on Wednesday, reversing its recent downward trend following intervention by the Reserve Bank of India. The central bank sold dollars to curb volatility and stabilize the currency, marking its sharpest single-session gain since mid-December. Analysts point to proactive RBI defense against foreign capital outflows and ongoing macro headwinds.

Rupee Gains as RBI Steps In

The Indian rupee appreciated on Wednesday, closing at 89.88 per dollar, up from 90.17 in the previous session. This marks a significant reversal after the local currency had weakened approximately 0.7 per cent in the preceding two weeks. Dealers confirmed the Reserve Bank of India (RBI) actively intervened by selling dollars to halt the rupee's one-way depreciation.

Central Bank's Stabilizing Hand

Market participants noted that the RBI's move was aimed at smoothing excess volatility and preventing disorderly movements in the currency. While this intervention provided immediate relief, stabilizing the rupee below the psychologically crucial 90 level, broader macroeconomic factors remain a concern. These include sustained dollar demand, evolving capital flow dynamics, and uncertainties surrounding trade deals. Abhishek Goenka, founder and CEO of IFA Global, highlighted these persistent challenges.

Year-to-Date Performance and Outperformance

The rupee has depreciated by 4.91 per cent in the current financial year. Despite this broader trend, the currency emerged as a regional outperformer on Wednesday. Dilip Parmar, senior research analyst at HDFC Securities, stated the central bank's strategic intervention catalyzed this rally, neutralizing the impact of foreign capital outflows.

Lingering Pressures and Technical Levels

Market sentiment continues to be influenced by delays in U.S.-India tariff negotiations, which exert downward pressure on the rupee. However, the RBI's proactive defense has established a necessary floor against a strengthening dollar in recent sessions. Technically, the spot rupee faces support at 89.40 and resistance at 90.30. The Indian unit has seen significant depreciation against the dollar in recent periods, positioning it as a notable underperformer among Asian currencies. Foreign portfolio investors (FPIs) remain consistent sellers of equities and buyers of dollars, contributing to daily downward pressure. Simultaneously, the RBI's clear signaling against one-sided currency moves prompts speculators to unwind long dollar positions. Latest data indicates the RBI's outstanding net short dollar position in the rupee forward market increased to $66.04 billion by the end of November, up from $63.6 billion in October, signaling potential future market adjustments when these trades mature.

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