Rupee Records Strongest Recovery in 13 Years, Jumps 173 Paise to 93.1
The Indian rupee staged a remarkable comeback on Thursday, soaring 173 paise to close at 93.1 against the US dollar, up from Tuesday's close of 94.83. This surge represents the currency's most robust recovery in 13 years, fueled by decisive regulatory actions from the Reserve Bank of India (RBI) aimed at curbing speculative bets and unwinding dollar positions.
RBI's Stringent Measures Drive Rupee's Rally
The rebound followed a series of aggressive steps by the central bank to tighten rules in the forex market. The RBI barred offshore non-deliverable forwards, restricted the rebooking of cancelled foreign exchange contracts, and imposed a cap on banks' forex positions at $100 million. These measures triggered heavy dollar sales in the domestic market, lifting the rupee while widening the gap between onshore and offshore markets and pushing up hedging costs.
Similar interventions were last seen in 2013 when the RBI acted to stabilize the currency after a sharp decline. The recent moves have reduced market liquidity, widened bid-ask spreads, and fragmented trading across segments, with a potential fallout being reduced interest in Indian bonds as hedging costs increase.
Market Volatility and Global Factors Pose Risks
Despite the recovery, dealers remain wary of fresh volatility when forex markets reopen next week, following a new round of US bombing in Iran after market hours. This geopolitical development has driven global oil prices higher, adding pressure to the rupee, which had already been under strain from a surge in oil prices due to the West Asia conflict and global risk aversion.
The currency had fallen over 4% since February 28 before its recovery and around 10% in FY26, making it among the weakest in the region. Earlier in the week, the rupee breached the 95 level, closing at 94.70 and hitting a low of 94.84. Markets are closed on April 3 for Good Friday, a public holiday.
Impact on Forex Trading and Future Outlook
Dealers noted that the non-deliverable forward market, where parties place bets on the rupee's movement in foreign currency, has grown larger than the spot market. With many players betting on the rupee weakening in offshore markets, banks had been arbitraging by buying dollars onshore and selling them offshore, adding pressure to the currency.
Looking ahead, the rupee is expected to continue receiving support as banks unwind open dollar positions ahead of the April 10 deadline. Dealers anticipate the currency to trade in a range of approximately 92.20 to 93.20, with ongoing monitoring of global oil price trends and geopolitical developments influencing future movements.
