Rupee Weakens to 90.19 Per Dollar as RBI Intervention Cushions Market Pressure
The Indian rupee weakened to 90.19 per dollar on Tuesday, pressured by declining domestic stocks and regional currency weakness. RBI intervention through dollar-selling operations helped limit the decline. HSBC analysts project seasonal improvement with the rupee potentially strengthening to 88 per dollar by March 2026, contingent on trade deficit narrowing and progress in US-India trade talks. Trump's proposed 25% levy on Iran-trading countries adds uncertainty given India's $1.34 billion bilateral trade with Iran.
*this image is generated using AI for illustrative purposes only.
The Indian rupee faced downward pressure on Tuesday, closing at 90.19 per dollar compared to the previous session's close of 90.1625. The currency's decline was attributed to weakness in domestic equity markets and broader Asian currency movements, though intervention by the Reserve Bank of India helped cushion the fall.
Market Performance and Regional Context
India's benchmark equity indices underperformed during the trading session, with specific declines recorded across major indexes:
| Index | Decline |
|---|---|
| BSE Sensex | 0.2% |
| Nifty 50 | 0.3% |
The domestic market weakness coincided with broader regional currency pressure, as Asian currencies slipped between 0.1% to 0.8% during the session. This regional weakness contributed to the overall pressure on the rupee.
Central Bank Intervention
The Reserve Bank of India actively intervened to limit the rupee's decline through dollar-selling operations across multiple markets. The central bank's intervention was conducted in both the non-deliverable forward market and the local spot market, effectively blunting what could have been more significant currency weakness given the multi-front pressure.
Additionally, the deferral of Indian bonds' inclusion in a flagship global index added to the downward pressure on the currency during the trading session.
Analyst Outlook and Seasonal Factors
Despite current headwinds, analysts at HSBC have expressed a tactically favorable view on the rupee for the first quarter of FY26. Their optimism is based on seasonal factors and potential trade developments:
| Projection Timeline | Expected Level | Key Factors |
|---|---|---|
| March 2026 | 88 per dollar | Seasonal trade deficit narrowing |
| End of 2026 | 90 per dollar | Post-seasonal adjustment |
The firm's positive outlook hinges on a seasonal narrowing in the trade deficit and assumes progress in US-India trade talks.
Trade Relations and Policy Developments
US-India trade discussions remain a critical factor for rupee performance. Washington's ambassador to New Delhi confirmed that the two countries scheduled a trade call for Tuesday. However, new uncertainty emerged from President Trump's announcement of a 25% trade levy on any country conducting business with Iran.
| Trade Parameter | Value |
|---|---|
| India-Iran Bilateral Trade | $1.34 billion |
| Time Period | First 10 months of 2025 |
| Source | India's Commerce Ministry |
This trade relationship could potentially impact India under the proposed levy structure, adding another layer of complexity to currency considerations.
Market Watch
Market participants are closely monitoring several key developments that could influence rupee movement. The release of crucial US inflation data is expected later in the day, while ongoing concerns about threats to the US Federal Reserve's independence continue to create uncertainty in global markets. These factors, combined with the outcome of US-India trade discussions, will likely shape near-term currency direction.
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