Indian rupee registers biggest single-day gain in 7 months
What's the story
The Indian rupee made a strong comeback today after the Reserve Bank of India (RBI) stepped in to stabilize it. The RBI's aggressive dollar sales in the local market helped boost the rupee by as much as 1% to 90.0963, its biggest single-day gain since May 23. This comes after a series of record lows for the currency in recent weeks.
Market reaction
RBI's intervention and market response
The RBI's dollar sales were reportedly around the 91 level, according to VRC Reddy, head of treasury at Karur Vysya Bank. He said this move was aimed at countering the market's indifference toward the rupee's rapid depreciation. Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, also noted that the central bank's action would lead to an unwinding of speculative positions for now.
Currency fluctuations
Rupee's performance amid foreign outflows
Prior to today's surge, the rupee had fallen nearly 2% this month due to foreign outflows from local stocks and bonds. These were triggered by delays in finalizing a trade deal with Washington. Reddy said he doesn't expect much strengthening of the rupee beyond the 90 mark until the trade accord is completed.
External factors
Global funds and US tariffs impact on rupee
This year, global funds have withdrawn nearly $18 billion from local equities. These withdrawals have put additional pressure on the rupee while 50% US tariffs threaten exporters' dollar inflows. At the same time, strong imports are keeping demand for dollars high.