Rupee Holds Steady at 90.04 as Traders Navigate RBI Intervention Concerns
The Indian rupee traded steady at 90.04 against the dollar in early Friday trading, down marginally from 90.0175 in the previous session. Multiple RBI interventions this month have reduced trader appetite for betting against the currency despite ongoing pressures from potential US tariffs, weak portfolio flows, and elevated dollar demand at the reference rate. Market volatility indicators show defensive positioning with puts priced higher than calls.
*this image is generated using AI for illustrative purposes only.
The Indian rupee maintained stability in early Friday trading, with market participants exercising heightened caution following a series of central bank interventions that have reshaped currency trading dynamics. The local currency's performance reflects a delicate balance between persistent dollar demand and regulatory oversight.
Current Market Position
The rupee traded at 90.04 against the US dollar as of 10:15 a.m. IST, representing a marginal decline from its previous session close of 90.0175. This stability comes despite multiple underlying factors that continue to exert downward pressure on the currency.
| Metric | Current Level | Previous Close | Change |
|---|---|---|---|
| USD/INR Rate | 90.04 | 90.0175 | Marginal decline |
| RBI Reference Rate Premium | 0.50 paisa | - | Elevated demand |
| 1-month 25-delta Risk Reversal | -0.2 | - | Puts priced higher |
RBI Intervention Impact
Multiple Reserve Bank of India interventions throughout the month have fundamentally altered market sentiment and trading behavior. According to a senior foreign exchange trader at a Mumbai-based bank, these interventions appear designed to signal that the RBI will not tolerate one-way moves on the rupee.
The central bank's strategy has proven effective in blunting appetite for wagers against the currency. Traders report that interventions have occurred at "very unexpected" levels, creating a cautious environment particularly when the currency moves below the 90 level. This unpredictability has kept market participants on guard and reduced speculative positioning.
Market Pressures and Dynamics
Despite the RBI's active management, several factors continue to challenge the rupee's stability:
- Risk of fresh US tariffs creating uncertainty
- Weak portfolio flows affecting currency demand
- Persistent skew in hedging activity favoring dollar purchases
- Elevated demand for dollars at the daily reference rate
The dollar-rupee volatility skew reflects current market positioning, with the 1-month 25-delta risk reversal easing to -0.2. This indicates that dollar-rupee put options are priced higher than calls, suggesting market participants are paying more to protect against rupee strength rather than weakness.
Trading Recommendations and Outlook
Market experts are providing tactical guidance for different market participants. Anil Bhansali, head of treasury at Finrex Treasury Advisors, suggests that exporters should sell upticks on USD/INR on a cash/spot basis, while importers should buy dollars on all dips.
The RBI reference rate, which serves as the daily benchmark for contract settlements, was quoting at around a 0.50 paisa premium on Friday. This premium indicates elevated dollar demand and often attracts concentrated buying or selling activity that can influence the currency's direction.
Global markets are currently awaiting key developments including a crucial US jobs report and a Supreme Court ruling on the legality of sweeping global tariffs, which could provide additional direction for currency movements in the near term.
20
