Indian Rupee Poised for Best Weekly Gain Since March Following Policy Intervention

India — Rupee Rebounds as Policy Measures Drive Strongest Weekly Gain Since March

The Indian rupee extended its recovery on Friday, supported by regulatory changes and intervention from policymakers following a prolonged period of weakness.

The currency gained for a fifth consecutive session and was on course for its strongest weekly performance in seven months after authorities introduced measures to curb demand for dollars and discourage speculative trading.

At 11 a.m. Indian Standard Time, the rupee had strengthened approximately 2% to 94.88 per U.S. dollar, positioning it for its best weekly gain since late March.

The rebound followed a challenging period for the currency. During the previous week, the rupee had neared a record low of 96.96 per dollar as elevated oil prices, continued foreign portfolio outflows and rising demand for protection against further depreciation weighed on the market.

In response, policymakers introduced measures designed to ease pressure on the foreign exchange market.

These included efforts to redirect oil-related dollar purchases away from the market, increase the cost of hedging against further rupee depreciation and encourage mutual funds to suspend bulk subscriptions to gold exchange-traded funds.

The Reserve Bank of India (RBI) also imposed regulatory restrictions aimed at reducing dollar demand and curbing speculative arbitrage transactions.

The measures were supported by verbal intervention and broader efforts to stabilise the currency.

The policy response reflects an approach focused on addressing the underlying sources of pressure on the rupee instead of relying solely on broad monetary tightening.

One factor contributing to the currency’s weakness has been India’s exposure to elevated energy prices. Higher oil prices can raise import costs for economies that depend heavily on energy imports, increasing demand for foreign currency among companies purchasing oil.

Foreign portfolio outflows have added to the pressure, as international investors reducing their exposure to domestic financial assets can weaken demand for the local currency.

Together, these factors left the rupee vulnerable to further losses before policymakers stepped in.

Earlier in October, the RBI raised interest rates for the first time in nearly four years and indicated that further tightening remained an option to discourage capital outflows and speculative pressure.

The latest recovery also coincided with a reduction in bearish positions in the non-deliverable forwards market, where investors trade contracts linked to future exchange rates.

The policy measures have improved short-term market sentiment, although the rupee’s longer-term direction will continue to depend on domestic and external conditions.

The RBI’s approach differs from the more aggressive monetary tightening adopted during India’s currency pressures in 2013. This time, policymakers have placed greater emphasis on targeted foreign exchange measures rather than relying primarily on broad increases in borrowing costs.

The rupee’s recovery marks a substantial improvement after the currency recently approached record lows. However, pressure from oil prices and capital flows remains a key concern for policymakers.

Trading in the coming sessions will indicate whether the latest measures can maintain the currency’s upward momentum or whether renewed demand for dollars will trigger fresh weakness.