Rupee Recovers Above 90 on Back-to-Back RBI Support

No image 5paisa Capital Ltd - 2 min read

Last Updated: 8th January 2026 - 12:58 pm

Summary:

Rupee has strengthened by 0.3% to 89.88, highest in a week, on consecutive RBI interventions via state banks, countering FII selling and US trade tensions. recovery past 90/USD mark. 

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Rupee jumped 0.3% to 89.88 on Wednesday, its highest point in one week after recording an intraday high of 89.86, compared to Tuesday's close of 90.1650. Traders believe that the increase was primarily caused by the sale of the dollar by state-owned banks, which was probably directed by the Reserve Bank of India (RBI). This is the second day in a row that the RBI has intervened in this manner.

How RBI is Sticking to Its Old Playbook

The actions taken by the RBI mirror those taken in 2025, with RSI stalling the continual upward movement of the dollar and short-selling of currencies. Before Wednesday's activity, the rupee had fallen by approximately 1% in the previous two weeks due to weak Asian currencies. The policies of the RBI will continue to ensure that there is a two-way movement within the rupee, as well as to protect against rapid depreciation of the currency.

Challenges Remain

The ongoing outflow of foreign investor money since 2025, combined with uncertainty regarding a U.S.-India trade deal, continues to put downward pressure on the rupee. The U.S. has continued to impose tariffs on imports from India, which increased by 50% last year due to Russian oil purchases, thereby putting a significant increase in cost on imports and Foreign Institutional Investors. This will create significant challenges for the RBI's foreign currency reserve buffer of $697 billion.

Fundamentals Support Defensive Trade

RBI is in a strong position with fundamentals supporting the rupee. The current account deficit (CAD) has fallen to its lowest level in 20 years. The cash flows generated from domestic institutional investors are offsetting the selling activity of Foreign Institutional Investors (FIIs), and therefore stabilising the Indian equity markets despite significant trade friction between the two countries.

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