The rupee rose 6 paise to 90.32 against the US dollar in early trade on Thursday, extending its tentative recovery after hitting historic lows earlier this week. The rise comes a day after the currency staged a strong rebound on Wednesday as it broke a five-day losing streak to recover from losses and gained 55 paise from its record low. Already on Tuesday, the rupee had broken through the psychologically significant level of 91 per dollar for the first time, hitting an all-time low of 91.14 before closing at 90.93. According to experts, the turnaround was driven by government intervention bank-of-india" styleobj="[object Object]" class="" commonstate="[object Object]" frmappuse="1">Reserve Bank of India (RBI), which stepped in to sell dollars after a sharp and sustained decline in the currency. The rupee then climbed to an intraday high of 89.75 in the interbank order matching system, from levels near 91.00 before the central bank’s move. The RBI’s move reflected a strategy seen in October and November when it intervened on multiple occasions to counter the ongoing unilateral depreciation of the rupee. During these periods, the central bank sold dollars extensively in both the spot and non-deliverable futures (NDF) markets, resulting in strong intraday turnover. Unlike previous interventions that were carried out before the market closed, dollar sales began shortly after onshore trading began on Wednesday, a banker said. “The Indian rupee appreciated after a five-day losing streak, compounded by suspected aggressive central bank interventions,” said Dilip Parmar, research analyst at HDFC Securities. Market experts said the rupee’s decline this year was due to global pressures rather than domestic economic conditions. The currency has fallen nearly 6% against the dollar in 2025, making it one of the world’s worst-performing currencies. Analysts cited a widening trade deficit, 50 percent U.S. tariffs and continued investment outflows as key factors behind the weakness. “No currency has been hit harder by US tariffs than the Indian rupee,” analysts said, adding that uncertainty over a US-India trade deal had made investors cautious, Reuters reported.
Where is Rupee heading?
The State Bank of India (SBI) in its latest report has forecast a strong recovery in the rupee in the second half of the next fiscal, between October 2026 and March 2027. SBI said its assessment is based on historical currency behavior and internal analysis that suggests the ongoing weakening trend is not durable. The report noted that the rupee has gone through various cycles of depreciation and appreciation in the past and is likely to exit the current phase in the second half of the next fiscal. “We believe the rupee is likely to recover strongly in the second half of the next fiscal.” The report attributed previous rupee movements to strong foreign portfolio investment flows, particularly ahead of calendar year 2014. During this period, large and sustained inflows played a central role in determining the currency’s performance. However, SBI added that the global environment has changed since then. The report noted that such high portfolio inflows were no longer possible and geopolitical uncertainties, including delays in trade deals, were now having a greater impact on the rupee’s performance. According to the bank, the era of easy and abundant capital inflows has ended as global risks have worsened. Data cited in the report showed that net portfolio inflows averaged $162.8 billion between CY07 and CY14. In comparison, inflows fell to $87.7 billion between CY15 and CY25 (to date). The report further classified the rupee’s long-term behavior into three separate phases based on its interaction with the US dollar. The first phase: The period from January 2008 to May 2014 was characterized by a sharp weakening of the rupee against the dollar. During that period, the dollar rose an average of 1.7% while the rupee fell an average of 16.3%, a trend the report attributed to weak domestic fundamentals. The second phase: From May 2014 to March 2021, the movements of the rupee and the dollar were more closely aligned. During this period, the rupee depreciated by an average of 7.9%, broadly equivalent to a 5.1% appreciation in the dollar, indicating a more balanced relationship between the two currencies. The third phase: In September 2024 and up to now, both the rupee and the dollar have weakened at the same time. According to SBI, this marks a new regime driven by increased geopolitical uncertainty in the current global environment. Based on this framework, the currency is still in a devaluation phase but is expected to emerge from this phase over time. As global uncertainties ease, the currency is expected to recover significantly in the second half of the next financial year.
