Rupee breaks losing streak and records best day in two months thanks to firm RBI intervention

The Indian rupee soared on Wednesday, posting its best overnight gain in two months, after a crackdown by the Reserve Bank of India ended its five-day slide and eased nascent speculative pressures on the currency.The rupee closed at 90.38 per US dollar, up 0.7% from the closing rate of 91.0275 in the previous session.

The currency had fallen to an all-time low of 91.0750 during the previous session. The price jumped sharply after the spot market opened on Wednesday as the RBI intervened to support the rate, traders said.The intervention was a reflection of the central bank’s actions in October and November, when it intervened aggressively to disrupt ongoing one-way movements in the rupee. Before the RBI’s intervention, the currency had fallen by almost 2% in December.

The central bank’s move on Wednesday was a sign of “its discomfort with rapid depreciation (of the rupee) above recent levels,” said Abhishek Goenka, CEO of FX consultancy IFA Global.

“While broader USD/INR bias remains influenced by the trade deal and capital flow dynamics, today’s action reinforces the RBI’s role as a stabilizer rather than a defender of fixed levels,” he said.

The rupee is Asia’s worst-performing currency this year, battered by a stalemate in US-India trade talks, record portfolio outflows and continued corporate caution over further weakening of the currency. Clearing house data showed that import activity remained high in November, while exporters remained cautious as the rupee remained under pressure. This skew has put pressure on the rupee in recent months.

The currency’s fall has pushed it into ‘undervaluation’ territory, but investors remain wary of snapping up Indian stocks and bonds as a missing trade deal with the US exposes the currency to further weakness.

Meanwhile, a broadly stronger dollar hurt most Asian currencies on Wednesday. The dollar index rose almost 0.4% to 98.6.