Source Reuters
MUMBAI — The Indian rupee edged lower on Friday, as heavy dollar demand from local corporations and importers offset a generally positive trend among its Asian currency peers. Despite a broader softening of the U.S. dollar globally, the local unit struggled to maintain momentum, ultimately succumbing to domestic outflow pressures.
Market Performance
The rupee opened the session at 89.56 but quickly faced downward pressure, sliding 23 paise to trade near 89.94 against the greenback in early deals. This follows a volatile week where the currency briefly touched a record low of 91.07 before staged interventions by the Reserve Bank of India (RBI) helped it recover toward the 89-level.
While regional currencies like the Thai baht and Malaysian ringgit saw modest gains on Friday, the rupee was held back by:
Corporate Hedging: A surge in dollar-buying bids from importers looking to lock in rates following the recent recovery.
NDF Market Pressure: Maturing positions in the non-deliverable forward (NDF) market, which spurred dollar-buy bids at the daily reference rate.
Foreign Fund Outflows: Persistent selling by Foreign Portfolio Investors (FPIs), who offloaded equities worth over ₹1,700 crore in the preceding session.
Liquidity and RBI Intervention
The domestic market is also navigating a “dollar glut” in the banking system, which has pushed forward premiums to multi-year highs. To combat this, the RBI recently announced a 3-year, $10 billion FX swap scheduled for next month.
“The central bank’s measures are aimed at managing rupee liquidity without creating unintended signals on currency policy,” said a senior treasury head at a private bank. “However, the immediate demand for dollars from bullion importers and oil companies remains a formidable hurdle for any sustained rupee rally.”
Global Context
The U.S. Dollar Index (DXY) traded slightly lower at 97.89, as investors continued to bet on further interest rate cuts by the Federal Reserve in 2026. However, rising Brent crude prices, currently hovering around $62.34 per barrel, added to the rupee’s woes by increasing India’s import bill.
As the year draws to a close, analysts expect the rupee to remain in a tight range between 89.50 and 90.30, with the RBI likely to intervene should the currency approach the psychological 91-mark again.
