USD vs INR: Rupee at turning point? RBI action lifts currency to 92.85 per dollar

The rupee continued its upward momentum on Monday. It rose 33 paise to 92.85 against the US dollar in early trade. The currency opened at 93.13. It strengthened steadily as the session progressed.

At around 12:57 PM, the rupee is currently trading at 93.14 against US dollar.

The move builds on last week’s sharp rally. On Thursday, the rupee surged nearly 1.8 per cent to close at 93.10. This was one of the biggest single-day gains in over 12 years.

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The recent shift suggests a change in short-term sentiment, following a period of sustained weakness.

What sparked this change?

The Reserve Bank of India's intervention and policy tightening were the primary catalysts for the rebound.

The central bank has taken steps to stabilise the currency and reduce speculative pressure.

It tightened norms in the forex derivatives market. It also capped banks’ net open positions at $100 million. This effectively limits aggressive positioning against the rupee.

Market participants believe the RBI is sending a clear signal. It wants to prevent disorderly depreciation. It is also aiming to anchor expectations in the currency market.

Liquidity, positioning and sentiment shift

The rupee’s recovery is also linked to positioning. Traders had built large bearish bets in recent weeks.The RBI’s action forced unwinding of these positions.This led to a sharp short-covering rally.

At the same time, India’s strong forex reserves have provided comfort.The reserves are seen as adequate to cover nearly 12 months of imports. This gives the central bank room to intervene if needed.

Bull case: Why the rupee may strengthen further

As per Zee Business research, Several factors support a constructive outlook:

• RBI’s proactive stance reduces near-term downside risk
• Strong forex reserves provide a buffer against external shocks
• Easing geopolitical tensions could reduce crude oil premiums
• A potential UK trade deal may improve export competitiveness
• Lower volatility could bring back carry trade interest

Global brokerages remain optimistic on the rupee trajectory.

• Bank of America expects the rupee to strengthen towards 86 per dollar
• ING sees levels around 87 per dollar

Bear case: Key risks to watch

Despite the sharp rebound, risks remain elevated:

• The US dollar index continues to stay firm above the 100 mark
• Sustained RBI intervention may not be viable indefinitely
• Foreign institutional investors (FIIs) remain net sellers

FIIs pulled out nearly Rs 1.22 lakh crore in March. This marked the ninth consecutive month of outflows. Persistent capital outflows continue to pressure the rupee structurally.

Oil prices remain another key risk. For every $10 rise in crude, India’s current account deficit widens by about 0.5 per cent of GDP. This can quickly reverse currency gains.Uncertainty around US trade and tariff policies also adds to volatility.Some global firms remain cautious:

• UBS expects the rupee to weaken to 94 per dollar
• Bernstein sees levels as weak as 98 per dollar