Indian rupee recovers from record low, helped by foreign banks’ dollar sales

MUMBAI: The Indian rupee ended above the 90 per dollar level after hitting a record low on Thursday, as dollar sales from multiple foreign banks, likely on account of inflows, helped the currency snap a six-session losing streak.

The rupee fell to 90.42 early in the session before reversing course to end up 0.2% at 89.9750.

Multiple headwinds, from a wider trade gap to weak investment flows amid stalled trade talks with the U.S., have sapped dollar inflows into the world’s fifth-largest economy and made the rupee Asia’s worst performing currency.

India’s central bank will tolerate a weaker currency as inflows dry up, Reuters reported on Thursday, citing people familiar with central bank’s thinking.

On the day, dollar sales from foreign banks picked up in the latter half, which alongside likely selling interest in the non-deliverable forwards market helped the rupee recover, traders said. Two traders also flagged dollar offers from state-run banks.

India’s largest private lender sees Indian rupee falling to 92 in absence of quick US trade deal

“Given today’s price action, think the confidence on taking long bets (on USD/INR) will diminish heading into the monetary policy decision,” a senior trader at a Mumbai-based bank said.

The Reserve Bank of India’s policy decision, due on Friday, will be keenly watched for the rate action, measures on banking system liquidity and commentary on the rupee’s slump.

Analysts expect the rupee to continue facing headwinds in the near-term but ING says that the currency could stage a meaningful reversal should the trade talks turn favourable, “making it one of the few high-yielders with upside potential in 2026.”

Asian currencies were mostly weaker on the day while the dollar index traded near a five-week low after lackluster U.S. data cemented the case for a Federal Reserve rate cut next week.

Odds of a 25 basis point U.S. rate cut are currently at 87%, per CME’s FedWatch tool.