Indian Rupee Stages Late-Session Rally on Aggressive Central Bank Intervention

The Indian rupee surged sharply in the final minutes of Friday’s session following aggressive dollar sales by the nation’s central bank, a forceful move traders and analysts said was explicitly designed to crush speculative bets against the currency.

The rupee climbed 0.7% to close at 89.6525 per dollar, with the bulk of the gains materializing in the last ten minutes of trading. According to traders familiar with the transactions, the Reserve Bank of India (RBI) executed significant dollar sales in the spot market to prop up the local unit. This action follows a similarly robust intervention on Wednesday, which had driven an intraday gain of 1%.

A Strategic Shift in Tactics
Market participants interpreted the timing—a heavy intervention at the market close—as a deliberate strategic shift from the central bank.

“Intervening heavily toward the close is a masterstroke to kill speculation because it does not give reaction time to speculators to reposition,” said Ritesh Bhansali, Deputy Chief Executive Officer at Mecklai Financial Services. “This element of surprise and decisiveness is what was missing from the RBI’s approach in recent weeks. It signals a clear intolerance for disorderly moves.”

Context of Persistent Pressure
The RBI’s forceful actions come after the rupee tested a series of record lows in recent weeks, breaching the 90 mark against the dollar. Year-to-date, the currency remains down approximately 4.5%, burdened by nearly $18 billion in foreign portfolio outflows from Indian equities and lingering global uncertainties. External factors, including a resilient US dollar, elevated crude oil prices, and delays in key trade negotiations, have compounded the pressure.

This week’s decisive interventions, however, helped the rupee post its largest weekly gain since June, providing a respite from its sustained decline.

Market Sentiment and Forward Outlook
The RBI’s palpable defense of the currency is expected to alter near-term market behavior. “Speculators will be extremely wary hereon to take one-sided short trades against the rupee,” said Sajal Gupta, Head of Forex and Commodities at Nuvama Institutional Desk. “The central bank has drawn a line in the sand. This decisive action is expected to import some much-needed stability and could anchor the rupee within a narrower range in the coming sessions.”

Analysts note that while interventions can stem speculative attacks and smooth volatility, the rupee’s medium-term trajectory will ultimately be guided by fundamental drivers. These include the direction of foreign capital flows, India’s trade deficit, the broader global risk environment, and the monetary policy divergence between the US Federal Reserve and the RBI.

The RBI’s latest maneuvers demonstrate its substantial foreign exchange reserves, estimated at over $600 billion, and its willingness to deploy them to ensure financial stability, sending a clear warning to currency market speculators.

 

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