The Indian rupee staged a strong comeback in early trading on Thursday, gaining 61 paise to trade at 96.25 against the US dollar, following multiple record lows in previous sessions. The rebound was primarily driven by a decline in oil prices, which had been a major factor dragging the domestic currency lower in recent days.
Rupee Recovery Amid Persistent Pressure
According to traders cited by Reuters, the rupee was expected to open in the range of 96.66 to 96.70 after closing at 96.82 on Wednesday. However, despite this recovery, the currency remains under significant pressure and is currently witnessing a nine-session losing streak. During this period, the rupee has weakened by approximately 2.5% and repeatedly touched fresh lows against the US dollar.
So far in 2026, the rupee has fallen more than 5%, adding to a 5% decline recorded in 2025. The persistent weakness reflects global uncertainties and sustained foreign investor outflows from Indian equity markets.
RBI Announces $5 Billion Dollar-Rupee Swap Auction
In a move to address liquidity concerns, the Reserve Bank of India (RBI) on Wednesday unveiled a $5 billion dollar-rupee swap auction. The USD/INR Buy/Sell swap auction, scheduled for May 26, will have a three-year tenor. The central bank stated that the step was being taken "to meet the durable liquidity needs of the system."
Under the swap arrangement, banks will provide US dollars to the RBI and receive rupees in exchange. At the end of the three-year period, the RBI will return the dollars, while banks will return the rupees. This mechanism is designed to improve liquidity and ensure better availability of funds in the banking system.
Market Sentiment and Foreign Investor Outflows
The RBI has rolled out several measures in recent months to maintain sufficient liquidity conditions in the banking system. The latest announcement comes as the rupee continues to face pressure from global uncertainty and persistent foreign investor outflows from Indian equity markets. Foreign investors have withdrawn billions of dollars from domestic markets amid pressure on emerging market currencies.
Meanwhile, the positive mood was also visible on Dalal Street, with benchmark indices gaining 0.4%. Around 10 am, the BSE Sensex was trading at 75,633.04, up 314.65 points or 0.42%, while the NSE Nifty50 jumped to 23,779.80, up 120.80 points or 0.51%.
The rebound in the rupee and the equity markets suggests a temporary respite, but analysts caution that the currency remains vulnerable to further global shocks and capital outflows.
