Central bank intervention hoists Indian rupee but bearish undercurrent persists

MUMBAI: The Indian rupee posted its biggest one-day gain in a month on Monday as central bank intervention helped it rebound from near its all-time low, even as traders expect the currency to tilt more towards depreciation in the near-term.

The rupee ended at 89.23 against the U.S. dollar, up 0.3% from its close at 89.48 in the previous session. The currency has declined more than 4% so far in 2025 and hit an all-time low of 89.49 on Friday.

While the central bank’s presence blunted the immediate pressure on the currency, market participants anticipate a continuing downward bias for the rupee in the absence of a breakthrough in U.S.-India trade negotiations.

The Reserve Bank of India likely intervened before the local spot market opened on Monday, and intermittently thereafter, helping the currency hold above its all-time low, traders said.

“RBI may have thought it more prudent to conserve ammunition and intervene at higher levels in USD/INR instead of going all in at 88.80 itself,” FX advisory firm IFA Global said in a note.

The firm holds a mildly bearish outlook on the currency and expects it to hover in a 88-89.50 range over the next 6 weeks.

The wait for a trade deal with the U.S. in the meantime has hurt trade and portfolio flows into India, exerting pressure on the currency even as the domestic economy remains resilient. India’s GDP growth data for the July-September quarter is due on Friday.

Elsewhere, the dollar index was down modestly at 100.1 while Asian currencies traded mixed.

Currencies had a muted reaction to a bounce-back in wagers on a rate cut by the U.S. Federal Reserve next month and to peace plans related to the ongoing Russia-Ukraine conflict.

“We think the combination of promising Ukraine peace talks and the Beige Book poses downside risks to the dollar this week,” analysts at ING said in a note.

The Fed’s Beige Book contains a summary of business and labour conditions across the U.S. and will be in focus for cues on the central bank’s interest rate path.