Rupee Rebounds to 89.5 as Dollar Softens: What Importers and Investors Should Expect

The Indian rupee bounced back to about 89.5 against the U.S. dollar on Tuesday, helped by a weaker dollar and recent central‑bank support.

Rupee’s recent recovery

After hitting a record low of 91.0750 last week, the rupee climbed sharply. Traders say the jump was mainly due to aggressive, well‑timed intervention by the Reserve Bank of India, which stopped the currency’s slide.

Importers likely to buy more dollars

With the rupee now stronger, many import‑dependent companies are expected to increase their dollar hedges to lock in cheaper rates. Bank FX desks have already seen a rise in hedging demand, and they expect this trend to keep the rupee from moving higher too quickly.

Dollar weakness and global cues

The U.S. dollar index slipped about 0.3% on Monday, driven by a more upbeat risk mood and expectations that the Federal Reserve may keep cutting rates. A possible intervention by Japanese authorities to support the yen also added pressure on the dollar.

Key market indicators

• One‑month NDF rupee forward: 90.26
• On‑shore one‑month forward premium: 45.88 paise
• Dollar index: 98.07
• Brent crude: $62 per barrel (down 0.1%)
• Foreign investors in Indian equities (Dec 21): net $240.3 million bought
• Foreign investors in Indian bonds (Dec 21): net $43.2 million bought

What this means for you

If you hold rupee‑denominated assets, the recent bounce may give a short‑term lift. However, the expected increase in dollar buying by importers could keep the rupee near current levels for a while. Keep an eye on the dollar index and any further RBI actions.

Remember, this is just my perspective, not a prediction. Always do your own research before making any investment decisions.