MUMBAI: India’s rupee recorded the strongest gain among major Asian currencies after rebounding from a record low, helped by official support measures as the Reserve Bank of India reiterated its approach of smoothing excessive currency volatility rather than defending a specific level. The rupee strengthened as much as about 0.7% in Thursday trading and ended near 91.60 per U.S. dollar, recovering from a new all-time low around 92.30 a day earlier. The move contrasted with broad pressure across regional currencies as global investors sought dollars amid a sharp rise in energy prices and heightened geopolitical risk.
The slide to a record low followed a week of market turbulence driven by a surge in crude oil prices and risk-off trading across equities and bonds. India is a large net importer of oil, and higher crude prices can widen the trade deficit and increase demand for dollars from refiners and other importers, adding strain to the local currency during periods of global volatility.
Market shock lifts demand for dollars
The Reserve Bank of India has repeatedly said it does not target the rupee’s level and intervenes only to curb excessive volatility and maintain orderly market conditions. Governor Sanjay Malhotra said in early February that foreign exchange reserves stood at $723.8 billion as of Jan. 30, a record level that provides more than 11 months of merchandise import cover.
Currency traders tracked the rupee’s sharp reversal alongside changes in forward-market pricing and onshore liquidity conditions, which indicated active efforts to contain one-way moves. The rupee’s recovery also coincided with a steadier tone in other Asian currencies after a volatile start to the week, as markets digested swings in oil and U.S. interest rate expectations.
RBI policy framework anchors response
In public remarks over recent months, Malhotra has emphasized that a country should not be judged solely by its exchange rate and that India’s external position remains resilient, citing high reserves and macroeconomic stability. The central bank’s framework focuses on limiting disruptive movements that can impair hedging, trade invoicing and financial stability, while allowing the rupee to adjust to fundamentals.
India’s currency remains weaker for the year, reflecting a strong U.S. dollar backdrop and periods of foreign portfolio outflows from local assets. Equity benchmarks also traded lower this week as global risk appetite deteriorated, reinforcing demand for safe-haven assets and adding to dollar strength across emerging markets.
The rupee’s rebound provided short-term relief for importers and companies with dollar liabilities, while exporters and hedgers continued to monitor daily volatility around the psychologically important 92-per-dollar area. Market participants also watched the pace of crude oil gains and broader financial conditions as key factors shaping intraday moves in the currency. – By Content Syndication Services.