The Indian rupee staged a recovery on Thursday, pulling back from its weakest-ever level to close with gains against the US dollar. The domestic currency ended the session at 89.96 per dollar, appreciating by 19 paise from its previous close. This rebound was supported by a softer US dollar index and suspected intervention by the Reserve Bank of India (RBI) to steady the currency.
Volatile Session Sees Rupee Touch New All-Time Low
The trading day began on a weak note for the rupee, which opened at 90.36 against the greenback. It faced immediate pressure from persistent selling by foreign investors, elevated crude oil prices, and uncertainty surrounding the delayed India-US trade deal. The selling pressure intensified, pushing the local unit to a new historic low of 90.43 during the session. This decline followed Wednesday's breach of the psychologically significant 90-per-dollar mark for the first time, when it had closed at 90.15.
However, the currency found its footing later in the day. Traders cited reports of the RBI stepping in to curb excessive volatility, with nationalised banks seen buying dollars at higher levels, likely on behalf of the central bank. Simultaneously, the US dollar lost momentum after ADP non-farm payroll data from the US came in far below market expectations, providing additional support to emerging market currencies like the rupee.
Economic Pressures and Analyst Outlook
Chief Economic Adviser V Anantha Nageswaran commented on the rupee's movement on Wednesday, stating that its depreciation was not currently feeding into higher inflation or hurting exports. He noted that a weaker currency could potentially boost outward shipments while making imports more expensive. Sectors heavily reliant on imports, such as electronics, petroleum, and gems and jewellery, may face strain from higher input costs, he added.
Market analysts pointed to continued headwinds. Foreign institutional investors (FIIs) remained net sellers, offloading equities worth Rs 3,206.92 crore on Wednesday, as per exchange data. Anuj Choudhary of Mirae Asset ShareKhan stated the rupee might continue to "trade with a negative bias" due to FII selling and domestic market weakness. However, he added that a subdued dollar and rising expectations of a Federal Reserve rate cut could offer some cushion. "Any further intervention by the central bank may also support the rupee," Choudhary said, projecting a trading range of 89.65 to 90.50 for the USD-INR pair.
Broader Market Context and What Lies Ahead
The broader financial markets presented a mixed picture. Equity indices closed firm, with the Sensex gaining 158.51 points to 85,265.32 and the Nifty rising 47.75 points to 26,033.75. Positive domestic economic indicators, including upside surprises in GDP growth and a strong HSBC India Services PMI reading of 59.8 for November, provided underlying support.
Global factors remained in focus. Brent crude futures were trading 0.22% higher at $62.81 per barrel, maintaining pressure on India's import bill. The dollar index, which gauges the greenback's strength against a basket of six major currencies, eased marginally by 0.01% to 98.84.
All eyes are now on the Reserve Bank of India's monetary policy announcement scheduled for Friday. Governor Sanjay Malhotra's rate-setting panel will deliberate on falling inflation, solid economic growth, the rupee's weakness, and ongoing global geopolitical tensions. The outcome will be crucial in determining the near-term trajectory for the currency and the economy.
