Rupee Rises 8 Paise to 86.8013 Against the Dollar at Opening

On February 13, the Indian rupee opened 8 paise higher against the US dollar as the dollar index weakened.

The domestic currency began trading at 86.8013 and later moved to 86.8350 against the dollar. In the previous session, it had settled at 86.8887.

Meanwhile, the dollar index, which measures the US currency against a basket of six major currencies, declined to 107.742 in early trading, down from 107.938 in the last session.

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RBI's Role in Supporting the Rupee

The Reserve Bank of India (RBI) has been actively intervening in the foreign exchange market, providing crucial support to the rupee. Over the past few months, the central bank has been closely monitoring the currency’s performance and has taken steps to prevent excessive volatility. Analysts believe the RBI’s strategy involves selling dollars in the open market to stabilize the rupee.

On February 10, the rupee had plunged to a record low of 87.9563 following new tariff announcements by US President Donald Trump. The protectionist measures led to concerns over global trade, prompting investors to flock to the dollar as a safe-haven asset. However, after the RBI stepped in, the currency rebounded to 86.47 against the dollar on February 12. This intervention highlighted the central bank’s commitment to maintaining stability in the forex market.

Government’s Perspective on Rupee Volatility

Addressing Parliament, Finance Minister Nirmala Sitharaman cited former RBI Governor Raghuram Rajan to explain the rupee’s depreciation. She pointed out that major currencies had experienced volatility and that the dollar index had surged 6.5% between October and January.

"Former RBI Governor Rajan, who even joined the Bharat Jodo Yatra, acknowledged on January 15, 2025, that the focus is always on the rupee-dollar exchange rate. However, the reality is that the dollar has been strengthening against several currencies, including the Euro. So, it is essentially a dollar-related issue," she stated in the Lok Sabha.

Experts believe that the rupee's depreciation is not just a domestic issue but part of a broader global trend where emerging market currencies have weakened against the dollar. The US Federal Reserve's tight monetary policy, rising interest rates, and persistent inflation have contributed to the dollar’s strength.

Market Outlook and Future Expectations

Amit Pabari, Managing Director at CR Forex Advisors, anticipates continued fluctuations in the rupee, expecting it to trade within the 86.60–87.20 range in the near term. He noted that 87.20 represents a strong resistance level, while 86.50 serves as key support, with a slight bias toward appreciation.

Financial experts suggest that geopolitical tensions, inflationary pressures, and upcoming economic data releases will play a crucial role in determining the rupee’s trajectory. Investors will closely watch the US inflation report, Federal Reserve meeting minutes, and any changes in domestic monetary policy by the RBI.

In addition to central bank interventions, foreign capital flows will be another key factor influencing the rupee. India has seen a mixed trend in foreign direct investment (FDI) and foreign portfolio investment (FPI) inflows, which directly impact the demand and supply of the currency. If foreign investors pull funds out of Indian markets in favor of US assets, the rupee may come under further pressure. Conversely, strong domestic economic growth and improved investor sentiment could support the local currency.

Conclusion

The Indian rupee's movement remains closely tied to global economic developments, especially the strength of the US dollar. While the RBI's interventions have provided short-term relief, the long-term outlook will depend on multiple factors, including US monetary policy, global trade dynamics, and domestic economic resilience. With ongoing volatility, businesses and investors will need to stay vigilant and adopt risk management strategies to navigate currency fluctuations effectively.