Indian rupee: RBI props up rupee to its biggest gain since Nov ’22

The Indian rupee on Tuesday strengthened by 64 paisa, its biggest single-day gain in almost two years, to close at 83.83 to $1, following strong intervention by the Reserve Bank of India (RBI). The uptick triggered stop losses for speculative bets against the rupee, causing unwinding of long dollar positions, traders said.

The rupee touched a peak of 83.75 during the day, its biggest single-day gain since November 2022, according to Bloomberg. On Monday, the rupee had weakened to an all-time low of 87.95 to $1 and later closed at 87.47. The dollar index stood at 108.2.

“The move today definitely took markets by surprise, and the appreciation was majorly because of RBI intervention. Stop losses were triggered at about 87/$1 levels for those who had hedged expecting rupee to depreciate further,” said Dilip Parmar, currency research analyst at HDFC Securities. “These stop losses also triggered speculative dollar selling..”

A trader with a public sector bank said on condition of anonymity, “Some exporters, especially ones with unhedged positions would have suffered losses today.”

The RBI is speculated to have sold $7 billion on Tuesday, said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

The rupee was the best performer on Tuesday, appreciating 0.75%, while the worst performer, the Thai baht, depreciated 0.49%, Bloomberg data showed.The sudden uptick in the currency comes days after RBI governor Sanjay Malhotra said market forces decide the value of the rupee with respect to the US dollar and the central bank is not worried about day-to-day movement of the currency value.Market participants, however, expect the rupee to continue to see depreciation bias. Continuous selling by foreign portfolio investors, the potential for a trade war along with policy easing by the RBI have together weighed on the rupee.

“We note that the accentuated moves in USDINR witnessed lately has brought the currency to near fair value. However, given the unrelenting global uncertainties in the near term we expect the pressure on INR to continue,” Kotak Mahindra Bank said in a note on Tuesday.