Rupee's Resilience: Bouncing Back Amidst Global Turbulence

The Indian rupee showed signs of recovery after hitting a record low against the US dollar. Despite global market pressures, notably post-Trump's win, the rupee has exhibited relative resilience. RBI interventions and cautious optimism about upcoming policy changes contribute to its marginally improved stance.

The Indian rupee demonstrated a significant rebound on Tuesday morning, following a record-breaking low in the previous session. Trading at 85.75 against the US dollar, the currency displayed resilience after touching an all-time low of 85.84. According to a report from Union Bank of India, the rupee might find support at 85.50 and could face resistance around 85.90, potentially testing 86.50 if breached.

Despite the pressures mounting after Donald Trump's electoral victory, the Indian currency has managed to hold its ground better than several other major currencies. The US Dollar Index saw an increase of more than 2.5% throughout December 2024, closing with a positive streak for the third consecutive month. However, the rupee's value dipped by about 3% during 2024.

Concerns over the HMPV virus and the ongoing US exceptionalism policy uncertainty have applied additional pressure on global currencies, indirectly strengthening the dollar. The rupee's sentiment suffered due to weak trade data, poor Balance of Payment dynamics, and currency market volatility. The Reserve Bank of India has actively engaged in the forex market to curb the rupee's depreciation by managing liquidity, including the strategic sale of dollars. Despite the forex reserves dropping from their September peak of USD 704.89 billion to USD 640.279 billion, Rupee's fallout was less severe against the Dollar than its Asian counterparts when most major global currencies depreciated in November 2024.

However, December witnessed renewed momentum in the rupee's decline, primarily attributed to changes in the RBI's governorship and speculations of possible rate cuts in the anticipated monetary policy meeting.

(With inputs from agencies.)