Indian Rupee’s revival: Best close in over two weeks, outperform Asian peers

Indian rupee

Indian rupee staged a strong comeback on December 19, rising past the psychologically important 90-mark against the US dollar to settle at its highest level in over two weeks and outperformed peers.

Currency experts said the move is supported by the heavy intervention by the Reserve Bank of India (RBI) in last two days.

The domestic currency closed at 89.6525 against the US dollar, up from an opening level of 90.1500 and the previous close of 90.2513. This marks the rupee’s strongest finish since December 1, when it had closed at 89.5587.

According to Bloomberg data, the rupee appreciated 0.67 percent on a single day, emerging as the best-performing currency among Asian peers.

Over the week, it gained 0.86 percent, and since the RBI began heavy interventions on December 16, the currency has strengthened by 1.54 percent.

“Rupee was moving smoothly between 89.95 to 90.40 when RBI Sunami hit the market and rupee hit a high of 89 before closing at 89.27. All this happened in the last three minutes which caused huge volatility in the markets,” said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Rupee bounce back

The central bank has been defending the local currency since it touched and cross the 91-mark by intervening in the spot market.

The central bank’s action came at a time when the rupee had been hitting consecutive record lows and, earlier this week. Such relentless depreciation triggered concerns over imported inflation, and broader market sentiment, prompting the RBI to lean heavily on its foreign exchange reserves to stabilize the currency.

The currency has been under pressure in the last few weeks especially due to delay in the trade deal, which led to the currency hitting fresh record lows. On the other hand, the limited intervention by the RBI was also adding to the pain.

In last three months, the rupee has been trading in the range of 88.20-91.03 against the US dollar.

Further, Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said near-term direction will depend on RBI meeting minutes, dollar movement and FII flows, with the rupee expected to trade in the 89–90 range.