The rupee on Tuesday rose 0.7 per cent, highest in nearly two years, closing at ₹86.83 level against US dollar, led by the Reserve Bank of India’s active intervention, traders say.
RK Gurumurthy, treasurer at Karnataka Bank, says the RBI has spent close to $10 billion over the last two days based on guesstimates. The appreciation comes when the dollar has remained stronger elsewhere. “It’s a very timely move by RBI and should arrest the frothy weakness,” he said.
Amit Pabari, MD at CR Forex, said net inflow of ₹295 crore, primarily into debt markets, provided the initial push to rupee. Sensing an opportunity, the RBI stepped in aggressively, selling an estimated $4-5 billion through state-run banks in the local spot market. As stop-loss levels were breached, exporters were forced to unwind positions, further amplifying the rupee’s momentum.
- Also read: Weekly Rupee View: Rupee may consolidate
Outlook
Gurumurthy says that RBI interventions always tend to only check an overdrive, and over the medium-term rupee should mean-revert to mid-to-lower 80s level against US dollar. According to Paras Jasrai, Senior Economic Analyst, India Ratings & Research, prospects of high tariff feeding into the US inflation and the related status quo in Fed rates are keeping the dollar strong and thereby having pressure on the rupee.
“Therefore, the commentary by US fed chair and economic outlook are a key monitorable. The near-term expectations for the rupee could be to test the 88-mark, and then perhaps 90 could be the mark,” he said. Pabari, meanwhile, says the rupee could trade within the 86.60-87 range going ahead.
Market participants are now closing eyeing the outcome (on tariffs) of meeting between Prime Minister Narendra Modi and US President Donald Trump scheduled on February 12-13.