The Indian rupee has strengthened for the second consecutive session on Wednesday, buoyed by suspected intervention from the Reserve Bank of India (RBI) and aided by lower global crude oil prices. The rupee closed at 89.88 against the US dollar, a 0.3% increase and its highest closing level in a week. Earlier in the trading day, it touched an intraday high of 89.86. This appreciation pushes the currency above the psychologically important 90 per US dollar mark.
Market participants believe that dollar sales from state-run banks, likely acting on behalf of the RBI, contributed to the rupee's upward movement. This intervention strategy is familiar, as the RBI employed it repeatedly in the past year to curb excessive rupee depreciation and destabilize speculative positions anticipating a consistently weakening rupee. The RBI's recent intervention aimed to disrupt these "one-way moves". Before this intervention, the rupee had depreciated by approximately 1% over the preceding two weeks.
The rupee's recent gains occurred amidst persistent headwinds, including continuous foreign selling of Indian equities that began in 2025 and has extended into the new year, coupled with ongoing uncertainty surrounding a potential U.S.-India trade deal. Furthermore, early trading on Wednesday saw the rupee surge by 26 paise to 89.92, supported by a weaker dollar and falling crude oil prices.
Analysts suggest that resilient macroeconomic fundamentals and improved capital inflows, contingent on the easing of U.S.-related trade uncertainties, should alleviate pressure on the rupee. However, some anticipate the currency to remain range-bound as the RBI may rebuild its foreign exchange reserves if portfolio inflows recover. Goldman Sachs forecasts the rupee to reach approximately 89.50 in three months and 91 in six months.
Other factors influencing the rupee include foreign institutional investors offloading equities worth ₹107.63 crore on Tuesday and a slight dip in the dollar index. Brent crude, a global oil benchmark, traded at $60.10 per barrel, a decrease of 0.99%. The domestic equity market also experienced a decline, with the Sensex falling 102.20 points to 84,961.14 and the Nifty decreasing 37.95 points to 26,140.75.
