Indian rupee snapped its five-day losing run as it closed 0.7% higher — the biggest single-day gain in two months — against the US dollar on Wednesday, December 17. The Indian rupee closed the session at 90.38 per US dollar, as against its last closing price of ₹91.0275.
However, helped by the earlier missing support from the Reserve Bank of India, the domestic unit staged a smart bounce in trade today. According to multiple media reports, traders and analysts, the central bank stepped in to shore up the Indian rupee.
A Bloomberg report earlier today stated that the RBI intervened after it bought $5 billion of dollars via a foreign-exchange swap on Tuesday.
According to a Reuters report, the intervention echoed the RBI action in October and November, when it intervened aggressively to disrupt sharp drawdowns in the Indian rupee.
Despite today's sharp rebound, the rupee remains Asia's worst-performing currency this year, shedding over 6% against the US dollar, hurt by a stalemate in India-US trade deal talks and record portfolio outflows.
Will this mark a turning point for rupee?
After today's rise, the pertinent question remains whether the rupee is likely to weaken from here or whether it can bounce back.
According to N. ArunaGiri, CEO, TrustLine Holdings, based on REER metrics, the scope for further sustained depreciation appears limited. From current levels, the rupee is more likely to stabilise and gradually normalise, rather than remain under persistent pressure, he added.
"If conditions improve through a reversal in FPI flows, progress on trade negotiations, or selective RBI intervention, the rupee could retrace by 2–3%, moving back toward its historical REER range of 102–103 over time. In fact, from a valuation perspective, the current move appears somewhat overdone," he said.
Historically, the rupee has tended to trade in a mildly overvalued REER range of around 102–103. It reached a peak close to 108 in late November 2024, a level that clearly reflected overvaluation. In contrast, the rupee is currently trading in the 98–100 REER range, which suggests it is now fairly valued rather than meaningfully undervalued.
Meanwhile, Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said the sustainability of this recovery remains uncertain as India–US trade deal clarity is still awaited and FII selling continues. "Volatility is expected to persist, with the rupee likely to trade in the 89.80–90.80 range,” he added.
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