The Indian rupee snapped a six-day losing streak on Thursday, staging a dramatic recovery from its historic low to close stronger against the US dollar. The domestic currency's rebound was primarily fueled by suspected intervention from the Reserve Bank of India (RBI) and a weakening US dollar in global markets.
Sharp Reversal from Record Lows
After opening weak at 90.36 and plunging to a fresh all-time low of 90.43 during intraday trade, the rupee reversed course decisively. It gained 29 paise to settle at 89.90 against the US dollar, compared to its previous close of 90.19. Market analysts pointed to direct action by the central bank as the key catalyst for this turnaround.
"The Indian rupee reversed its six-day losing streak, appreciating against the US dollar. This upturn is primarily attributed to likely intervention by the central bank and the unwinding of speculative positions," stated Dilip Parmar, Research Analyst at HDFC Securities.
RBI's Strategic Market Move
Forex market participants reported that the RBI's activity was visible in the spot market around the 90.30-90.40 levels. Experts suggest the central bank may have employed a sophisticated tool to stabilize the currency without depleting foreign exchange reserves excessively.
"Market participants speculated that the RBI may have executed a sell–buy swap, which not only supplied dollars in the spot market but also helped smooth volatility without draining reserves outright. This intervention lifted the rupee off its record lows," explained Dipti Chitale, CEO of Mecklai Financial Services Pvt Ltd.
Adding to the positive momentum, forward premiums continued to rise, reflecting a wider interest rate differential and heightened demand for hedging instruments.
Global Factors and Underlying Challenges
The rupee also received support from a softening US dollar index (DXY), which fell to 98.78 on Thursday. "The dollar index weakened as markets began pricing in a Fed rate cut expected next week. The softer dollar globally provided additional support to the rupee’s recovery," added Chitale.
Despite the day's recovery, analysts caution that the rupee's fundamental outlook remains challenging. It continues to face headwinds from sustained foreign portfolio investor (FPI) outflows and a wide trade deficit. Data revealed that FPIs sold domestic equities worth Rs 4,752.4 crore on Thursday, adding to the significant selling pressure seen throughout the year.
According to NSDL data, foreign investors have offloaded Rs 13,121 crore of Indian shares so far in 2025. HDFC Securities' Parmar noted that the spot USD/INR pair now faces immediate technical resistance at 90.45, with support placed at 89.70.
All eyes are now on RBI Governor Sanjay Malhotra's policy address scheduled for Friday, December 5, where his remarks on the currency will be closely scrutinized by market participants for further directional cues.
