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RBI Intervenes to Support Rupee, Aims to Keep USD/INR Near 90

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  //business-finance.news-articles.net/content/202 .. -support-rupee-aims-to-keep-usd-inr-near-90.html
  Published in Business and Finance on Friday, January 2nd 2026 at 3:00 GMT by moneycontrol.com

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RBI Steps In: Likely Intervention Near 90 on USD/INR as Rupee Faces Mounting Pressure

The Indian Rupee has been under significant pressure in recent weeks, steadily depreciating against the US Dollar, prompting the Reserve Bank of India (RBI) to reportedly intervene actively through state-run banks. According to sources cited by Moneycontrol.com, the RBI is aiming to keep the USD/INR pair within a range close to 90, signaling its commitment to preventing excessive volatility and anchoring market expectations. This intervention comes amidst global economic uncertainty, rising US interest rates, and persistent dollar strength.

The Rupee's Recent Descent & Underlying Factors:

The Indian Rupee has been experiencing a downward trend since early October 2023. As of mid-November, it had touched a record low of ₹83.27 against the dollar. While this level hasn’t been consistently maintained, the rupee remains vulnerable. Several factors are contributing to this depreciation:

• US Dollar Strength: The US Federal Reserve's aggressive monetary policy – raising interest rates to combat inflation – has made the US Dollar more attractive to investors globally. Higher interest rates draw capital inflows into the US, boosting demand for dollars and pushing its value up against other currencies, including the Rupee. The Moneycontrol article highlights that the Dollar Index (DXY), which measures the dollar's strength against a basket of six major currencies, has been consistently elevated.
• Geopolitical Risks: Ongoing geopolitical tensions, particularly the Israel-Hamas conflict and the Russia-Ukraine war, are fueling uncertainty in global markets. Investors tend to flock to safe-haven assets like the US Dollar during periods of heightened risk aversion, further strengthening its position.
• Capital Outflows: While India remains a relatively attractive investment destination, there have been instances of capital outflows as investors rebalance their portfolios and seek higher returns elsewhere. This puts downward pressure on the Rupee. The article mentions that foreign portfolio investors (FPIs) have been net sellers in Indian equities recently, contributing to this outflow.
• Rising Crude Oil Prices: India is a major importer of crude oil, and rising global oil prices increase the country’s import bill, requiring more dollars for payments, which consequently weakens the Rupee. The recent surge in oil prices due to geopolitical tensions has exacerbated this effect.
• RBI's Own Policy Considerations: While the RBI aims to stabilize the currency, it also needs to consider inflation and economic growth. A sharply depreciating rupee can fuel imported inflation, potentially forcing the central bank to tighten monetary policy further, which could dampen economic activity.

The RBI’s Intervention Strategy: Utilizing State-Run Banks

According to sources speaking with Moneycontrol, the RBI is employing a strategy of indirect intervention by directing state-run banks (like SBI, Bank of Baroda, and Punjab National Bank) to actively sell US Dollars from their reserves in the forex market. This approach allows the RBI to influence the exchange rate without directly revealing its hand through large, explicit interventions. This method is preferred because:

• Discretion: Indirect intervention minimizes speculative activity that can arise when traders anticipate direct RBI action.
• Controlled Impact: It provides a more gradual and controlled impact on the currency's movement.
• Reduced Reserve Depletion: While any intervention involves using foreign exchange reserves, indirect methods are perceived as less impactful than outright buying of dollars.

The report suggests that these state-run banks have been instructed to offer Dollars at rates near 89.50-90.00, effectively preventing the Rupee from breaching the psychological barrier of 90. Traders indicate that this intervention has been noticeable and is contributing to the rupee's relative stability compared to what might otherwise be expected given the prevailing global conditions.

The Significance of the 90 Level:

The RBI’s focus on keeping the Rupee near 90 suggests that this level holds symbolic importance for the central bank. Crossing this threshold could trigger further speculative selling and erode market confidence, leading to a more rapid depreciation. Maintaining it signals the RBI's resolve to manage volatility and prevent panic in the markets.

Challenges & Future Outlook:

Despite the RBI’s efforts, maintaining the Rupee near 90 faces significant challenges. The underlying factors driving dollar strength – US interest rate hikes, geopolitical risks, and capital outflows – are likely to persist for some time. Furthermore, continued pressure on crude oil prices could further weaken the rupee.

The Moneycontrol article notes that while the RBI has substantial foreign exchange reserves (over $560 billion as of November 2023), it needs to carefully balance intervention with preserving these reserves for future contingencies. Excessive and continuous interventions can deplete reserves quickly and may not be sustainable in the long run. Therefore, the RBI's strategy will likely remain a delicate balancing act, adapting to evolving market conditions while signaling its commitment to currency stability.

Conclusion:

The RBI’s intervention through state-run banks to keep the USD/INR pair near 90 highlights the central bank’s proactive approach to managing exchange rate volatility. While challenges remain, this strategy aims to anchor market expectations and prevent excessive depreciation of the Rupee amidst a backdrop of global economic uncertainty and dollar strength. The effectiveness of this intervention will depend on how these external factors evolve in the coming months.

Disclaimer: This article is based solely on information presented in the Moneycontrol.com report cited above and does not constitute financial advice.