Indian rupee’s RBI-led push past 90 risks reversal on dollar strength, hedging

MUMBAI: The Indian rupee is likely to struggle to sustain its move past the 90-per-dollar mark on Thursday, with dollar strength and hedging demand weighing on the currency.

The 1-month non-deliverable forward indicated the rupee will open in the 89.92-89.96 range versus the US dollar, having advanced 0.3% to 89.88 on Wednesday.

The rally was largely intervention-driven, with aggressive dollar selling by the Reserve Bank of India, resembling a strategy it deployed multiple times in 2025 to break one-way moves.

Bankers said that after the rupee rose past 90 per dollar, there was a noticeable pickup in hedging activity from importers, alongside renewed interest in building long dollar positions, with the move seen offering more attractive levels instead of signalling a shift in the underlying trend.

“The move lower (on dollar/rupee) doesn’t change the underlying bias,” a currency trader said. “The fundamentals point higher, and RBI-led dips are an opportunity (for importers and speculators).” The rupee faces mild headwinds from a firmer dollar index, with most Asian peers weaker amid a tepid risk backdrop. US data out on Wednesday was mixed.

The US labour market remained subdued, data showed, with job openings falling more than expected in November and hiring easing.

At the same time, services activity picked up unexpectedly in December, suggesting the economy finished 2025 on a firmer footing.

The services data beat all expectations for December and was remarkably robust, ING Bank said in a note, highlighting that the reading was the highest since October 2024.

“The soaring US services clouds the Fed rate cut story,” the note said. Investors are pricing in at least two further rate cuts by the Federal Reserve this year after it delivered three consecutive cuts in recent meetings.