Rupee gains for second day amid RBI intervention, trade deficit relief
Hyderabad: The Indian rupee strengthened for a second straight session on Monday. It recovered from recent lows with continued support from the Reserve Bank of India. The performance of this currency is closely tied to such interventions.
The currency opened 24 paise higher at 89.41 against the US dollar. It had closed at 89.65 on December 19, dealers said, indicating a positive start for India’s rupee.
Meanwhile, market participants said RBI intervention in the spot market helped steady the rupee. However, recent volatility remained a key concern for traders dealing with this currency.
Key levels watched amid volatile market conditions
Analysts said the recovery of the Indian rupee depended on sustained RBI support and global dollar movements. As a result, near-term direction would hinge on overseas cues.
Currency traders said 89.20 emerged as a crucial support level for the rupee. If the currency breaks below that mark, it could move towards the 88.50–88.30 range.
The Indian rupee found support from easing external pressures. In particular, a lower trade deficit and improved foreign fund flows aided sentiment.
On Friday, the rupee gained 0.67 percent in a single session, briefly crossing the 90 mark against the dollar. However, it later closed lower. Still, it ended as the best-performing Asian currency.
Trade deficit narrows, FPI flows remain mixed
In November, foreign institutional investor selling weighed on India’s currency. At the same time, domestic flows supported equity markets, while bond yields hardened.
India’s external balance improved as the merchandise trade deficit narrowed to $24.5 billion in November. Earlier, the deficit stood at $42 billion in October, putting pressure on the Indian rupee.
Moreover, a steady surplus in services exports continued to cushion the external account. Consequently, pressure on India’s currency eased.
In December, foreign portfolio investors remained net sellers in nine of the first 11 trading sessions. Meanwhile, a recent report by Bank of Baroda warned that volatility could persist.
According to the report, FPI flows, RBI spot intervention, and forward market activity drive short-term currency moves, influencing the status of the Indian rupee. Additionally, capital flows and current-account receipts influence the rupee, though such data are not available daily.