Rupee Bounces Back: RBI's Strategic Move Weakens 100 USD to INR Exchange Rate

The Indian Rupee demonstrated significant resilience on Wednesday as the Reserve Bank of India (RBI) stepped into the foreign exchange market with decisive interventions. The USD/INR pair retreated sharply by over 1% to hover near the 90.00 mark, pulling back substantially from its recent all-time high of 91.56. This correction signals a turning point for a currency that had been struggling against the US Dollar throughout the year, suffering a decline of approximately 6.45%.

RBI’s Intervention Props Up the Rupee

Central bank action proved instrumental in reversing the Indian Rupee’s downward trajectory. Multiple traders reported spotting state-run banking institutions aggressively supplying US dollars to the market, widely believed to be executing RBI’s directives in both spot and Non-deliverable Forward (NDF) trading segments. This orchestrated move reflects the RBI’s commitment to preventing further deterioration of the domestic currency, which had earned the unfortunate distinction of being Asia’s worst performer this year.

The timing of the intervention underscores growing concerns about persistent capital outflows plaguing India’s equity markets. The absence of a concrete trade agreement between the United States and India has created a vacuum that continues to drain foreign investment. Recent data revealed that Foreign Institutional Investors (FIIs) have maintained a net selling position in seven out of the past eleven months, with December alone witnessing foreign stake reductions worth Rs. 23,455.75 crore from Indian equities.

Monetary Policy Signals Support for Recovery

RBI Governor Sanjay Malhotra delivered reassuring signals to the market through recent statements, indicating that interest rates will remain at accommodative levels over an extended period. He also highlighted that the latest GDP readings had presented unexpected developments, prompting the central bank to refine its economic forecasting methodology. Most notably, Malhotra projected that a successful trade resolution between India and the US could contribute as much as 0.5% to the nation’s overall GDP growth, providing additional motivation for sustained rupee support.

Global Dollar Dynamics and Market Crosscurrents

While the Rupee staged its recovery, the broader US Dollar experienced a mixed performance during Wednesday’s trading. The US Dollar Index (DXY), serving as the benchmark for the Greenback’s strength across six major currencies, edged higher by 0.17% to settle around 98.40, rebounding from Tuesday’s eight-week trough near 98.00.

This modest dollar appreciation came despite concerning economic indicators from the United States. Labor market data for October and November painted a weaker picture: the combined Nonfarm Payrolls (NFP) report revealed job losses of 105K in October followed by only 64K additions in November, while the Unemployment Rate climbed to 4.6%, representing the highest level since September 2021. Retail Sales growth stalled completely on a month-on-month basis when a 0.1% increase was anticipated, and preliminary PMI readings deteriorated with the Composite PMI dropping to 53.0 from 54.2 in the prior month.

Market analysts maintained that these disappointing figures, while concerning for the economic narrative, are unlikely to prompt near-term Federal Reserve policy adjustments given distortions from the US government shutdown. The CME FedWatch tool currently indicates minimal probability of rate cuts during the January 2026 policy meeting. Attention now pivots toward November’s Consumer Price Index data, scheduled for Thursday release, which could provide fresh guidance on inflation dynamics and Fed trajectory.

Technical Picture: Rupee Strength Reflects in Price Structure

From a technical standpoint, USD/INR demonstrates resilience with the pair trading at 90.5370 on the daily timeframe. Price remains firmly anchored above the ascending 20-day Exponential Moving Average (EMA), currently positioned at 90.1278, which continues its upward trajectory and sustains bullish technical positioning.

The Relative Strength Index (RSI) reads 59.23, sitting comfortably above the 50 midline and confirming constructive momentum following its pullback from previously elevated overbought territory in the 70s. The moderate momentum level suggests the pair has room to extend higher without immediately triggering exhaustion signals.

Initial support forms at the 20-EMA level of 90.1278, with a critical support cluster extending across 89.9556 to 89.8364. So long as price holds above the moving average anchors, the technical bias tilts toward further upside potential. A daily close below the support zone would signal a shift toward consolidation, while sustained price defense above this level keeps the door open for continued appreciation.

The Rupee’s Sensitivity to External Forces

The Indian Rupee remains inherently vulnerable to global and domestic forces. Crude oil pricing carries outsized importance given India’s heavy reliance on petroleum imports, while US Dollar movements shape trade dynamics as the international commerce standard. Foreign investment flows represent another critical determinant of rupee performance.

Policy intervention through RBI’s direct forex market participation and interest rate management constitute additional powerful levers. Rate hikes typically strengthen the Rupee by attracting carry trade flows, as international investors seek to exploit interest rate differentials. Macroeconomic fundamentals including inflation, growth rates (GDP), trade balances, and foreign capital inflows all contribute to the currency’s valuation. A favorable risk environment tends to boost foreign direct and indirect investment, providing structural support to the currency unit.