Rupee Rebounds Strongly, Recovers to 87 Against USD Amid RBI Intervention

The Indian rupee staged its biggest rally in over two years on February 11, recovering by 21 paise to reclaim the 87 per dollar mark after touching a record low of 87.9563 in the previous session. The sharp appreciation, which made the rupee Asia’s best-performing currency for the day, was attributed to heavy intervention by the Reserve Bank of India (RBI). Analysts suggest the central bank's active role helped stabilize the currency after market volatility caused by US President Donald Trump's latest trade tariffs on steel and aluminum imports.

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Rupee's Strong Recovery and RBI's Role

The rupee opened at 87.35 per dollar and strengthened further to 87.0750, marking a nearly 1% rise, the most significant gain since November 2022. This rebound followed a sharp depreciation on February 10, when the local currency hit an all-time low due to Trump's announcement of fresh import tariffs.

Bloomberg News quoted Anindya Banerjee, a currency strategist at Kotak Securities, who noted that the RBI has been actively intervening to curb excessive depreciation of the rupee. "The RBI has been heavily intervening since yesterday morning to support the rupee," he said, adding that the central bank will continue to prevent one-sided speculation in the currency market.

RBI's intervention typically involves selling US dollars in the forex market to absorb excess demand and support the rupee. Traders and analysts believe the central bank will remain active in ensuring stability, especially amid growing concerns over India's external trade conditions and capital outflows.

Impact of US Tariffs and Modi’s Upcoming Visit

The rupee's recovery comes amid growing uncertainties triggered by Trump's aggressive trade policies. The US president signed an executive order reinstating and expanding tariffs on steel and aluminum imports, raising duties on aluminum from 10% to 25% and imposing a 25% tariff on previously exempted steel imports. The move has rattled global markets, affecting emerging market currencies, including the Indian rupee.

Adding to the economic landscape, Prime Minister Narendra Modi is set to visit the US on February 12-13, where discussions on trade, defense, technology, and supply chain resilience are expected. Modi has highlighted that this visit will be an opportunity to further strengthen bilateral ties with the US, particularly in critical sectors like technology and defense. Experts believe the meeting could provide clarity on trade-related uncertainties and potentially help India's strategic positioning amid the US-China trade war.

India’s Proactive Measures and Future Outlook

According to a report by MUFG dated February 11, India has taken proactive steps to mitigate trade tensions by reducing certain duties and addressing unauthorized immigration concerns. The country aims to safeguard its interests in legal migration policies, such as the H1-B visa program, and leverage the US-China trade war to attract more manufacturing investments.

Despite the rupee’s recovery, analysts caution that market volatility could persist. The strength of the Indian currency will depend on continued RBI intervention, global economic developments, and India's ability to navigate the shifting trade landscape. As the US pursues stricter trade measures, India may need to strike a careful balance between protecting its export sectors and maintaining healthy economic ties with the US.

Conclusion

The rupee's sharp recovery to 87 per dollar highlights the RBI’s critical role in stabilizing the currency amid external pressures. While the market has reacted positively to the central bank’s intervention, ongoing US trade policies and global economic uncertainties will remain key factors influencing forex trends. Modi’s upcoming US visit could play a crucial role in shaping future trade agreements and securing economic advantages for India. Investors and market participants will closely watch these developments for further cues on currency movement and economic policy direction.