Indian rupee traders look for cues after RBI dominates recent price action

MUMBAI: Indian rupee traders are assessing the near-term outlook for the currency in the New Year, after repeated intervention by the Reserve Bank of India in December overwhelmed underlying demand–supply signals and shaped price action.

With all major markets shut for the New Year holiday, traders said Thursday’s session was likely to see thin volumes and limited price discovery, and expect a largely flat opening for the rupee and range-bound trade.

The rupee had settled at 89.87 on the last trading day of 2025, registering a decline of nearly 5% over the year.

Last month, the currency declined by 0.46%, trading in a wide 89.25 to 91.0750 range.

In December, the Reserve Bank of India initially allowed the rupee to weaken before stepping in aggressively to support the currency.

The central bank’s heavy dollar sales flushed out long-dollar positions and reasserted its hold on price action.

In recent sessions, the rupee has settled into a narrow band, with the 90 level proving to be a support that traders say may represent a soft line of defence for the RBI.

“There will be conflicting forces at play in the near-term. I would say the underlying flows are still unsupportive (for rupee) and on the other side is RBI,” a currency trader said.

Outside of domestic flows, the key focus for the rupee and its Asian peers will be the dollar index, which had a difficult 2025, sliding 9.4%.

The performance of the US economy, along with the number of rate cuts delivered by the Federal Reserve this year, is expected to be key for the dollar in 2026, analysts said.