The Indian rupee demonstrated resilience near the critical 90-per-dollar threshold during Friday's trading session, with market participants crediting intervention by the Reserve Bank of India for the currency's stability. The rupee was trading near 89.98, repeatedly finding support around the psychologically significant 90 level.

Central Bank Intervention Through State-Run Banks

Traders reported observing dollar sales by state-run banks, which they believe were conducted on behalf of the central bank. This intervention strategy represents the RBI's typical approach to managing currency volatility without direct market participation.

Market Participant Observations

A trader at a mid-sized private sector bank noted the increased visibility of RBI's presence in the market. "The RBI's presence is more evident today, though it was probably there on recent days too," the trader commented, suggesting that central bank intervention may have been ongoing but became more apparent during Friday's session.

Currency Stability Measures

The rupee's ability to find consistent support around the 90 level indicates the effectiveness of the central bank's intervention strategy. This approach helps maintain market confidence while preventing excessive volatility that could impact broader economic stability.

The intervention reflects the RBI's commitment to managing currency fluctuations and maintaining orderly market conditions in the foreign exchange segment.

The Indian Rupee witnessed a modest recovery, appreciating by 6 paise to 89.92 against the US dollar during early trade on Friday. The currency's movement occurred amid thin liquidity conditions that accentuated everyday demand-supply imbalances, though it managed to gain ground from the previous session's close.

Currency Performance and Market Dynamics

At the interbank foreign exchange market, the rupee opened at 89.95 against the US dollar before strengthening to touch 89.92. This represented a recovery from Thursday's performance when the currency depreciated 10 paise to close at 89.98.

Forex traders indicated that the dollar-rupee pair is expected to trade within a narrow range, with the Reserve Bank of India actively protecting the 90 level. The support from positive domestic equities was offset by sustained foreign institutional investor outflows.

Expert Analysis and Outlook

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that unless the RBI intervenes heavily by selling dollars, movements will likely remain within small ranges. He projected the currency pair to remain in a holding pattern between 89.80 and 90, considering the recent narrow trading range observed over the last three sessions.

Bhansali highlighted that corporate demand, foreign portfolio investor demand, and government demand have been the salient features affecting the rupee over the past year. During this period, the currency fell by more than 5.00% and became the worst-performing Asian currency, though it remained partly protected by RBI interventions.

Global Market Context

The dollar index, which measures the greenback's strength against a basket of six currencies, was trading marginally down by 0.15% at 98.17. Brent crude, the global oil benchmark, was trading 0.38% higher at $61.08 per barrel in futures trade.

Amit Pabari, MD of CR Forex Advisors, suggested that with early-year liquidity remaining thin and domestic fundamentals offering a mixed but stable backdrop, the rupee appears set to remain range-bound in the near term. He projected USD/INR to trade in a 89.30-90.20 range, noting that as long as the pair stays below the 90 handle, the balance of risks tilts mildly in favor of the rupee.

Domestic Market Performance

Domestic equity markets provided some support to the currency, with the 30-share benchmark Sensex climbing 158.19 points to 85,346.79 in early trade. The Nifty gained 55.80 points to reach 26,202.35.

However, foreign institutional investors continued their selling pressure, offloading equities worth ₹3,268.60 crore on Thursday, according to exchange data.

Economic Indicators

On the macroeconomic front, gross GST collections provided a positive backdrop, rising 6.10% to over ₹1.74 lakh crore in December, compared to over ₹1.64 lakh crore in the previous December. The growth came despite slow revenue expansion from domestic sales following sweeping tax cuts, according to government data released on Thursday.