Rupee rebounds! Currency recovers on likely RBI intervention after opening at 91.07 vs US dollar; biggest single

The Indian Rupee experienced a sharp recovery Wednesday after hitting a record low of 91.07 against the US dollar. The currency's rebound to around 89.75 is suspected to have been triggered by intervention from the Reserve Bank of India (RBI).

Prior to the central bank's likely intervention, the rupee had been under pressure due to sustained portfolio outflows and a continuing deadlock in trade discussions between the US and India. The rupee's fall marked the fourth consecutive session of record lows. In the past five sessions, the rupee has declined close to 1%, and it's down approximately 6% since the start of the year.

Reuters reported that the rupee opened at a record low of 91.07 against the dollar, a 0.05% decrease from its previous close, before regaining some ground. Market observers noted similarities between Wednesday’s actions and the RBI's interventions in October and November, when the central bank acted to moderate sharp currency movements. The rupee's intraday recovery was the strongest in roughly seven months.

Earlier in the week, on Tuesday, the rupee had briefly fallen past the 91-per-dollar mark, reaching an all-time low of 91.14 before partially recovering to close 15 paise weaker at 90.93. This decline occurred despite a weaker US dollar and a significant drop in global crude oil prices. The rupee has faced persistent downward pressure in recent trading sessions. It fell below the 90-per-dollar level on Monday and has since hit new record lows for three consecutive sessions. Concerns about stalled India-US trade negotiations and ongoing portfolio outflows have contributed to this decline. Over the past 10 trading sessions, the rupee has weakened from approximately 90 to 91 against the dollar, losing nearly 1% in the last five sessions alone. This period has been characterized by strong demand for dollars and a divergence between the rupee's performance and that of other Asian currencies, along with increased interest in speculative short positions. The rupee's performance this year ranks among the worst globally, with a decline of about 6% against the US dollar. A widening trade deficit, punitive US tariffs of 50%, and consistent investment outflows have pushed the currency to record lows near the 91 level. Capital outflow due to FII activity has been driven by geopolitical uncertainty.