The Indian rupee staged a powerful comeback on Friday, December 19, registering its most robust single-day appreciation since May 2025. The domestic currency closed at 89.27 per US dollar, marking a significant leap of 97 paise from its previous close of 90.24 on Thursday.
A Week of Dramatic Swings and Central Bank Action
The rupee's impressive Friday performance capped its third consecutive day of gains, providing relief after a harrowing start to the month. The week was characterized by extreme volatility, where the currency plunged to successive record lows before the Reserve Bank of India (RBI) stepped in decisively. Driven by persistent foreign portfolio outflows and uncertainty surrounding a potential US-India trade deal, the rupee had hit an intra-day low of 90.79 on December 15. The sell-off intensified, pushing it to a historic lifetime low of 91.08 on December 16, with a closing level of 91.03.
The trend reversed dramatically in the middle of the week following aggressive intervention by the central bank. On December 17, the rupee climbed to 90.38, recording its most substantial single-session gain in several months. This recovery gained momentum, leading to the Friday rally that saw the currency close at 89.27. For the week ended Friday, the rupee appreciated by approximately 1.2%, its best weekly performance since June.
RBI's Strategic Moves Deter Speculative Attacks
Foreign exchange traders attributed the sharp turnaround to heavy dollar sales by the RBI, likely executed through a public sector bank near the 3:30 pm spot market close. The central bank had also intervened earlier in the week when the rupee touched an all-time low of 91.1. From that trough, the currency has rebounded by about 2%, a move that has shifted near-term market sentiment and discouraged fresh speculative short positions against the rupee.
Dealers highlighted that the suddenness and scale of the RBI's actions sent a clear message that the central bank views the recent volatility as a speculative attack on the domestic currency, which it is prepared to counter firmly.
Outlook: Rupee Tops Asian Charts, Technical Levels to Watch
The robust rebound has propelled the Indian rupee to the top of the Asian currency rankings. Analysts point to a combination of corporate dollar inflows and a broader return of risk-on sentiment in global markets as supporting factors. With the RBI expected to remain proactive, the short-term outlook for the USD/INR pair has turned bearish.
"The Indian rupee has ascended to the top of the Asian currency rankings, fuelled by a clutch of corporate dollar inflows and a pivot back toward risk-on sentiment. With the RBI likely engaging in proactive intervention, the short-term outlook for USD-INR has turned bearish. Key technical levels to watch include support at 89.25 and a ceiling at 89.90," said Dilip Parmar, a research analyst at HDFC Securities.
The market will now closely monitor the RBI's strategy to manage volatility while observing global cues and the flow of foreign investments, which will be crucial in determining the rupee's trajectory in the coming sessions.
