Rupee gains 26 paise to close at 94.96 as dollar weakens; RBI support helps recovery

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The Indian rupee strengthened 26 paise to close at 94.96 against the US dollar on Friday, compared with Thursday’s close of 95.22, gaining in tandem with broader Asian peers as a retreat in the greenback and suspected intervention by the Reserve Bank of India (RBI) supported the domestic currency.

The US Dollar Index weakened towards 101.65 following the latest US economic data, while a stronger yen and euro added to the pressure on the greenback. Falling US Treasury yields also weighed on the dollar. Meanwhile, Asian currencies traded mostly higher, providing further support to the rupee.

Dilip Parmar, senior research analyst at HDFC Securities, said the rupee benefited from a softer dollar and continued gains in domestic equities. Easing foreign institutional selling also helped the currency outperform regional peers.

A currency market trader said the RBI appeared to be defending the rupee around the 95.26 level. "Yes, they (RBI) were protecting 95.26," the trader said.

Jateen Trivedi, vice-president and research analyst – commodity and currency at LKP Securities, said the rupee gained around 0.27 percent as the dollar index weakened and bullion prices remained under pressure.

The decline in precious metal prices provided some relief on the import front ahead of the festive season, supporting the domestic currency. Lower bullion prices can help moderate India's import bill at a time when demand for gold typically picks up during the festive period.

Sentiment also improved amid speculation that the RBI and the Finance Ministry could consider tax-related changes or other measures to attract foreign portfolio and institutional inflows. However, Trivedi cautioned that these expectations remained speculative and actual policy announcements would be important.

RBI measures and capital flows in focus

The recovery comes after the rupee faced sustained pressure from elevated crude oil prices, persistent dollar demand from importers and foreign portfolio outflows. In October, the RBI introduced measures to reduce spot dollar demand, including a dedicated dollar supply window for three state-run oil marketing companies and tighter restrictions on banks' foreign exchange positions.

Going ahead, Trivedi expects the rupee to trade in a range of 94.50–95.50, with its movement depending on dollar trends, capital flows and domestic policy developments.

Parmar pegged immediate resistance for the USD/INR spot pair at 95.40 and support at 94.75. Elevated crude prices and sustained foreign investor outflows, however, remain risks to a durable recovery.