Indian rupee rises for 2nd session amid RBI interventions

Indian Rupee Strengthens Against US Dollar, Supported by RBI Interventions
The Indian rupee saw a second consecutive session of gains on Monday, rising from recent lows due to ongoing efforts by the Reserve Bank of India (RBI). Starting 24 paise higher at 89.41 against the US dollar, compared to the previous close of 89.65 on December 19, the rupee’s comeback is marked by volatility. Analysts emphasize the importance of RBI actions and global dollar movements in the near future.
Market experts highlight 89.20 as a critical level, with a sustained drop below potentially leading to the 88.50–88.30 range. Factors such as a reduced trade deficit in November and foreign portfolio investors shifting to Indian equities and away from dollars have likely supported the rupee’s ascent.
In a significant single-day increase of 0.67% last Friday, the rupee briefly surpassed the key 90-mark against the US dollar, ultimately closing lower but outperforming other Asian currencies. While foreign institutional investor (FII) selling impacted the rupee in November, domestic investments boosted equity markets and bond yields.
India’s external balance has shown improvement, with the merchandise trade deficit shrinking to $24.5 billion in November from a substantial $42 billion in October. The surplus in services has further stabilized the country’s external position.
Despite recent volatility, Foreign Portfolio Investors (FPIs) have been net sellers in nine out of 11 trading days in December. Bank of Baroda predicts ongoing rupee fluctuations until a potential agreement with the US by March 2026. The bank’s report underscores the significance of FPI activities, RBI interventions, and changes in the forwards segment in influencing currency movements.
Daily flows in the current account, including IT receipts and remittances, alongside capital inflows like foreign direct investments and external commercial borrowings, also impact the market dynamics. However, these factors are not captured daily, limiting direct correlations with rupee fluctuations.
Tags: Reserve Bank of India, US Dollar, Bank of Baroda, Foreign Portfolio Investors, Indian Rupee