The Reserve Bank of India (RBI) believes the recent rupee weakness stems from speculative trading rather than economic factors and is actively intervening in both onshore and offshore markets to stabilize the currency, according to a person familiar with the matter. Alarmed by the rupee’s slide toward 89 per dollar, the RBI is determined to prevent a breach of its record low of 88.8050. Following reports of its intervention, the rupee strengthened to 88.07, marking its biggest gain in four months.
Analysts say the RBI may have acted decisively to counter speculative long positions and signal its firm stance. The central bank plans to keep intervening until speculative trades are fully unwound. The recent volatility, partly tied to trade tensions with the US, is seen as excessive by the RBI, which maintains that India’s fundamentals remain strong.
Market optimism over progress in India–US trade talks and expectations of US Federal Reserve rate cuts also boosted the rupee. With $700 billion in reserves, the RBI is confident it can defend the currency, viewing current pressures as speculative rather than reflective of the economy’s sound 6.5% growth and low inflation.
