Rupee Stabilizes After RBI Intervention

The Indian rupee recently saw heightened volatility but firmed up after aggressive central bank action. On Mar. 5 the rupee spiked to a 4-week high (~₹91.41 per USD) before settling at ~₹91.60, ending about 0.6% stronger on the day. This followed RBI intervention: state banks sold dollars to support the currency, after the rupee had hit a record low ₹92.30 on March 4.

The turmoil was driven by surging oil prices (Brent around $83) and fears that the U.S.–Israel war with Iran could stoke inflation and weigh on growth. Traders expected more RBI support amid those risks. DBS Bank’s Sameer Karyatt said, “We anticipate continued depreciation pressure on the INR… The RBI is expected to intervene to mitigate excessive volatility and sterilize these actions”. In fact, a January poll had predicted the rupee would trade in a narrow band (roughly ₹89–₹91) through March as RBI maintains heavy dollar sales.

With the central bank likely to stay active, analysts foresee the rupee fluctuating modestly. Consensus forecasts (Reuters poll, Jan) were ~₹89.75 by end-March, little changed from the then-rate. Other emerging Asian currencies also reacted to the crisis: the Thai baht and Malaysian ringgit initially fell, while Japan’s yen and Korea’s won strengthened on safe-haven flows. Overall, investors see India’s FX outlook as manageable so long as the RBI stands ready. Moody’s recently noted India’s strong $650bn forex reserves and prudent fiscal position bolster confidence in the rupee’s stability.

Pull quote: “We anticipate continued depreciation pressure on the INR… the RBI is expected to intervene to mitigate excessive volatility,” said Sameer Karyatt, head of trading at DBS Bank India.