Rupee edges higher against dollar after RBI intervention

The Indian rupee saw a modest recovery on Friday, closing the trading session at 96.73 against the U.S. dollar. This performance marked a slight improvement from the previous day's close of 96.79. During the afternoon session, the currency reached an intra-day high of 96.51 before facing renewed downward pressure.

Market participants observed that the Reserve Bank of India (RBI) engaged in significant intervention to support the currency. According to traders, the central bank sold dollars through major state-owned banks, a move that helped the rupee appreciate to its peak level during the day. Despite this regulatory support, the local unit remains under pressure due to an underlying demand for the greenback. Treasury professionals noted that companies were actively covering their positions, choosing to purchase dollars whenever the exchange rate reached lower levels.

The intervention comes as the RBI continues to utilize its forex reserves to stabilize the rupee, which has declined by approximately 7% throughout the current year, ranking it among the weaker currencies in the Asian market. Earlier in the week, Reserve Bank governor Sanjay Malhotra addressed the currency's performance, stating that the rupee is currently undervalued based on the real effective exchange rate. He emphasized that the central bank remains committed to ensuring the currency finds its appropriate valuation.

Looking ahead, market analysts expect the central bank to maintain its watch over the forex market. The interplay between state-led intervention and steady corporate demand for the dollar is likely to continue influencing the rupee's trajectory in the coming sessions. As the central bank seeks to mitigate volatility, the focus remains on whether these measures can provide a sustained floor for the currency amid broader regional economic trends.