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In the morning session, the rupee moved in a narrow range and briefly strengthened by 6 paise to 89.92, but traders said low liquidity conditions amplified routine demand–supply imbalances, leaving the currency biased toward weakness.
Market participants said the dollar/rupee pair is expected to remain range-bound in the near term, with the Reserve Bank of India seen actively protecting the 90 level. Dollar sales by state-run banks continued to support the rupee, reinforcing expectations that the central bank is attempting to prevent a decisive move beyond the psychologically important mark.
On Thursday, January 1, the rupee had already weakened by 10 paise to close at 89.98 against the US dollar.
“RBI seems to have been softly leaning against 90 over the past few days, and that’s coming through more clearly today,” a currency trader at a state-run bank said.
However, traders cautioned that the defence may be facing increasing pressure. Market participants have repeatedly tested the 90 level, indicating sustained underlying demand for dollars despite the RBI’s presence.
“The key question is whether this defence is enough to prevent a sustained move past 90. Friday’s price action suggests it may not be,” the trader added.
Another trader warned that a clear break beyond 90 could trigger additional dollar buying. “If there is a clean break and the RBI steps back, the move could extend quickly,” the trader said.
On the demand side, foreign banks were seen buying dollars for custodial clients, along with banks that typically handle large importer-related flows. Traders also pointed to continued pressure from capital flows, noting that foreign investors began the year as net sellers of Indian equities, adding to demand for the greenback.
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