Rupee Shows Resilience as RBI Measures Strengthen Market Stability

Mumbai – The Indian rupee ended the session marginally lower, reflecting routine market flows rather than any fundamental weakness in the domestic currency.

Traders said demand for dollars from local corporates and the rollover of maturing positions shaped intraday movement, even as broader Asian currencies showed mild gains.

The rupee closed near 89.7850 against the US dollar, marking a modest and orderly adjustment within a tightly managed trading range.

Market participants viewed the movement as a technical response to short-term demand rather than a shift in underlying sentiment.

In recent sessions, the rupee has shown the ability to rebound from record lows, underscoring growing confidence in central bank oversight.

This resilience has been supported by proactive liquidity management and clear policy signalling from the Reserve Bank of India.

While several Asian peers advanced, traders noted that domestic flow dynamics continued to dominate rupee pricing.

Such conditions are typical during periods of balance-sheet adjustments and year-end positioning by corporates.

The maturity of non-deliverable forward positions added to temporary dollar demand at the daily reference rate.

Despite this, price action in the spot market remained contained, reflecting healthy market depth and adequate dollar supply.

Forward market movements drew particular attention after the RBI announced a planned three-year dollar-rupee swap.

The $10 billion swap is part of a broader strategy to inject liquidity into the banking system while maintaining currency stability.

Following the announcement, short- and long-term forward premiums eased sharply, signalling improved rupee liquidity conditions.

Traders believe this move will help ensure smoother funding markets and reduce stress across financial instruments.

The liquidity injection is expected to support a sustained easing in government bond yields over the coming weeks.

India’s benchmark 10-year bond yield declined meaningfully, reinforcing expectations of supportive financial conditions.

Market analysts highlighted the balanced design of the RBI’s approach, which separates liquidity management from currency direction.

By using foreign exchange swaps alongside open market operations, the central bank avoids sending unintended signals to currency markets.

This combination supports orderly rupee movement while enhancing monetary policy transmission across the economy.

Such measures are particularly valuable during periods of global uncertainty and thin holiday trading volumes.

Globally, the US dollar has remained under pressure amid expectations of future interest rate cuts by the Federal Reserve.

This broader environment has helped limit downside risks for emerging market currencies, including the rupee.

Investors continue to see India as relatively well-positioned due to strong growth prospects and policy credibility.

Domestic demand, improving fiscal discipline, and steady capital inflows provide a strong foundation for currency stability.

Holiday-thinned trading conditions also contributed to subdued volatility, allowing markets to absorb flows smoothly.

Traders expect liquidity measures announced by the RBI to play out gradually into the new year.

These steps are seen as reinforcing confidence rather than reacting to stress.

Overall, the rupee’s modest slip reflects normal market behaviour within a stable macroeconomic framework.

The currency’s ability to remain range-bound highlights the effectiveness of India’s monetary and liquidity management.

As global markets navigate shifting rate expectations, India’s steady policy approach continues to anchor investor confidence.