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What is the story about?
The Indian rupee strengthened in early trade on Monday (December 22), extending its rebound from recent all-time lows as improved risk sentiment supported emerging market assets.
The currency rose 22 paise to 89.45 against the US dollar in early trade, after opening at 89.53. It had closed at 89.67 on Friday (December 19) following a sharp single-session gain.
Flows and corporate activity provide near-term support
Market participants said corporate dollar sales and renewed foreign portfolio inflows into Indian equities helped stabilise the currency. Foreign investors have turned net buyers over the past few sessions, reversing earlier selling pressure.
A lower merchandise trade deficit in November has also contributed to near-term comfort on the external balance, traders said.
Central bank intervention limits volatility
The Reserve Bank of India’s dollar sales through state-run banks last week played a stabilising role, helping the rupee recover from its recent trough.
Dealers said the intervention reduced intraday volatility and prevented disorderly moves in the currency market.
“The dollar-rupee has recovered about 2% from its all-time lows, though it remains weaker on a year-on-year basis,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, adding that the broader depreciation trend has not reversed.
Oil prices and global cues remain manageable
Brent crude traded near the $60-per-barrel level, easing concerns over import costs. Meanwhile, the dollar index was largely steady, offering limited headwinds to emerging market currencies, including the rupee.
Reserves position strengthens confidence
India’s foreign exchange reserves increased by $1.689 billion to $688.949 billion in the week ended December 12, according to Reserve Bank of India data, adding a buffer against external shocks.
Recent rebound follows sharp correction
According to Bloomberg data, the rupee has recovered about 1.5% from its record low of 91.03 reached earlier this month, closing below the 90 mark on Friday for the first time in seven sessions.
Analysts said recent currency pressure has been driven primarily by capital outflows rather than a deterioration in macro fundamentals. India’s current account deficit remains near 1% of GDP, but overseas investors have pulled out nearly $18 billion from equities so far this year, while debt inflows have slowed sharply.
“The dollar-rupee appears to be approaching the latter stage of its peak, supported by relatively stronger domestic fundamentals,” said Sandeep Tandon, Founder and CIO of Quant Mutual Fund.
Longer-term trend still under pressure
Despite the recent recovery, the rupee has declined about 4.1 per cent so far in 2025, making it the weakest-performing currency in Asia, even as several regional peers have posted gains.
-With agencies inputs
The currency rose 22 paise to 89.45 against the US dollar in early trade, after opening at 89.53. It had closed at 89.67 on Friday (December 19) following a sharp single-session gain.
Flows and corporate activity provide near-term support
Market participants said corporate dollar sales and renewed foreign portfolio inflows into Indian equities helped stabilise the currency. Foreign investors have turned net buyers over the past few sessions, reversing earlier selling pressure.
A lower merchandise trade deficit in November has also contributed to near-term comfort on the external balance, traders said.
Central bank intervention limits volatility
The Reserve Bank of India’s dollar sales through state-run banks last week played a stabilising role, helping the rupee recover from its recent trough.
Dealers said the intervention reduced intraday volatility and prevented disorderly moves in the currency market.
“The dollar-rupee has recovered about 2% from its all-time lows, though it remains weaker on a year-on-year basis,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, adding that the broader depreciation trend has not reversed.
Oil prices and global cues remain manageable
Brent crude traded near the $60-per-barrel level, easing concerns over import costs. Meanwhile, the dollar index was largely steady, offering limited headwinds to emerging market currencies, including the rupee.
Reserves position strengthens confidence
India’s foreign exchange reserves increased by $1.689 billion to $688.949 billion in the week ended December 12, according to Reserve Bank of India data, adding a buffer against external shocks.
Recent rebound follows sharp correction
According to Bloomberg data, the rupee has recovered about 1.5% from its record low of 91.03 reached earlier this month, closing below the 90 mark on Friday for the first time in seven sessions.
Analysts said recent currency pressure has been driven primarily by capital outflows rather than a deterioration in macro fundamentals. India’s current account deficit remains near 1% of GDP, but overseas investors have pulled out nearly $18 billion from equities so far this year, while debt inflows have slowed sharply.
“The dollar-rupee appears to be approaching the latter stage of its peak, supported by relatively stronger domestic fundamentals,” said Sandeep Tandon, Founder and CIO of Quant Mutual Fund.
Longer-term trend still under pressure
Despite the recent recovery, the rupee has declined about 4.1 per cent so far in 2025, making it the weakest-performing currency in Asia, even as several regional peers have posted gains.
-With agencies inputs
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