The rupee showed signs of recovery this week after slipping to its lowest level of 89.41 per dollar on November 21. On Monday, the currency touched an intraday high of 89.08 before closing at 89.23. It continued to strengthen on Tuesday, ending at 89.22 as the Reserve Bank of India intervened in the market to curb volatility.
The rupee has gained around 20 paise from its all time low, a fall triggered by concerns over delays in the India US trade deal, weak market sentiment and continued selling by foreign portfolio investors. Traders say that without progress on the trade agreement, the currency could test the 90 level.
Market participants noted that the central bank’s strong presence has helped stabilise the rupee. Amit Pabari of CR Forex said the latest rebound reflects the strength of India’s domestic environment and “a far clearer RBI presence,” supported by nearly 690 billion dollars of foreign exchange reserves and interventions in both spot and NDF markets.
The central bank has maintained that its goal is to smooth volatility rather than defend any specific level. RBI Governor Sanjay Malhotra recently said, “Historically, the rupee has depreciated by 3 to 3.5 per cent on an annual basis. Our effort is that the rupee’s movement remains smooth.”
Data shows that between January and September 2025, the RBI sold 20.1 billion dollars in the spot market. Its net forward dollar sales rose to 59.405 billion dollars in September. Economists say the large negative forward book limits how much further support the RBI can provide.
The sharp fall last week was triggered when the rupee broke through the 88.80 level, a level the RBI had defended for a long time. Once it slipped past this mark, traders rushed to cover short positions, accelerating the decline. Comments from the RBI Governor stating that the bank does not target any specific exchange rate also added pressure as markets reacted sharply.
A record goods trade deficit in October, falling exports and higher gold imports have added strain. Concerns around unwinding of yen carry trades have also kept investors cautious.
Analysts now expect the rupee to trade within a broader band of 88.90 to 90.20. The currency typically forms new ranges after breaking significant levels. Experts say that if the India US trade deal is finalised soon, the rupee could see a period of stability until early 2026. Without the deal, the currency may breach the 90 mark ahead of expectations.
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