Indian rupee steadies near 93 as RBI reins in bets

Rupee pauses losses after a volatile run

The Indian rupee hovered near 93.1 per US dollar after slipping to a three-week low, with market participants pointing to intervention and tighter oversight by the Reserve Bank of India (RBI) as key stabilisers. The currency was also cited near 93.2 in another session where easing geopolitical concerns supported risk sentiment. At the same time, the rupee strengthened to around 92.7 per dollar in a separate move that extended gains from the previous session. Together, these levels underscore a market that remains sensitive to both RBI actions and shifts in global headlines.

Even with intermittent rebounds, the broader tone around the rupee has stayed cautious. Persistent capital outflows, a rising import bill, and weak foreign investment were flagged as continuing headwinds. The RBI’s role has therefore been less about driving a strong appreciation and more about containing disorderly moves and volatility.

What the RBI did to calm volatility

One of the more direct measures highlighted was the RBI pushing lenders to unwind large arbitrage positions across onshore and offshore markets. That process reduced incremental demand for dollars and helped the currency recover from sharper intraday weakness. The rupee’s moves also reflected efforts to curb oil-related dollar demand, a recurring driver of near-term pressure when crude payments and importer hedging pick up.

Traders also indicated the central bank likely intervened through dollar sales to stop the USD/INR rate from breaching psychologically important levels. In one instance, the rupee ended Thursday at 91.9550 per dollar, down 0.2%, after touching an intraday low of 91.9850. The intervention backdrop matters because it can shape expectations for how far and how fast the rupee is allowed to adjust.

Geopolitics adds a temporary support layer

The rupee’s stabilisation was also linked to easing geopolitical concerns, particularly expectations that the US and Iran may extend their ceasefire by two weeks. That reduced fears of a broader escalation and helped steady global financial markets. For currencies like the rupee, a calmer global backdrop can reduce immediate demand for safe-haven assets and temper sharp swings in USD strength.

Still, the relief is described as supportive rather than decisive. Local drivers like capital flows and trade dynamics continue to dominate rupee pricing when geopolitical risk is not actively worsening.

Economic Survey flags a valuation disconnect

India’s latest Economic Survey described a paradox: strong macro performance alongside a weakening currency. Chief Economic Advisor V. Anantha Nageswaran said the rupee’s valuation does not accurately reflect India’s robust economic fundamentals, with the Survey stating the currency is “punching below its weight.”

The rupee’s decline was characterised as meaningful across multiple time frames. The USD/INR spot rate was cited hovering around 91.9130 on January 29, 2026, down 0.16% for the day and 6.05% over the preceding twelve months. Between April 1, 2025, and January 15, 2026, the rupee depreciated around 5.4%.

Capital outflows remain the main pressure point

The primary catalyst identified for the rupee’s slide is foreign portfolio investment (FPI) outflows. Foreign investors withdrew around $18 billion from Indian equities in 2025, with outflows continuing into early 2026. In the first two January trading sessions, outflows totalled $1.846 billion.

Separate figures also point to sustained selling pressure: investors divested over $1 billion from local stocks in January alone, following a $19 billion outflow in 2025. NSDL data showed FPI equity outflows of ₹36,811 crore up to January 27, 2026. The narrative across these datapoints is consistent: even when domestic fundamentals are stable, global risk appetite and comparative valuations can drive capital rotation away from India.

Trade, tariffs, and the import bill complicate the outlook

Market commentary linked rupee fragility to a rising import bill and India’s persistent deficit in goods trade. The Economic Survey noted that services surpluses and remittances have not fully offset that deficit during periods of reduced capital inflows. Separately, uncertainty over trade negotiations and tariffs was repeatedly highlighted as a factor weighing on sentiment.

A Reuters poll noted Washington’s punitive 50% tariffs on Indian goods are making some investors hesitate to invest, even as India remains one of the fastest-growing major economies. This uncertainty can translate into delayed allocations, reduced hedging appetite, and heightened sensitivity to negative surprises.

Reserves remain a buffer, but intervention has costs

India’s foreign exchange reserves were cited at about $101.36 billion as of January 16, 2026, offering a significant liquidity cushion. In another update, reserves were reported to have fallen by $1.70 billion to $187.03 billion. These figures reinforce that the RBI has ammunition to smooth volatility, but drawdowns can become a market talking point when pressure is persistent.

There is also a policy trade-off. The rupee’s weakness was linked to upward pressure on Indian government bond yields, and FX intervention can counter efforts to boost banking system liquidity. That creates a balancing act between currency stability, domestic liquidity conditions, and broader financial stability.

What strategists and polls are signalling

A Reuters poll of FX strategists suggested the rupee could trade in a narrow band over the next few months, with the RBI likely to keep up the same pace of interventions in the near term. The median forecast from 41 analysts polled between January 5-7 saw the rupee at 89.75 per dollar by end-March, then 90.3 by end-June 2026, and 90.8 in a year.

Other forecasts were more optimistic about appreciation through 2026. A Reuters poll from December 2025 predicted the rupee could strengthen to 88.91 by February 2026, while forecasts from CareEdge Ratings, Bank of America, and ING Bank ranged from 87.00 to 86.00 by year-end. Not all analysts agreed: DBS Bank India forecast further depreciation to 93-94 this year, citing dwindling capital inflows.

Key numbers at a glance

Why this matters for investors and policy

The rupee’s path is shaping market conditions beyond the FX screen. Persistent depreciation can affect importer costs, hedging demand, and bond market dynamics, particularly when intervention influences liquidity. For equity investors, the focus remains on whether foreign selling stabilises and whether tariff-related uncertainty eases.

For the RBI, the recurring theme is management rather than targeting a specific level. Measures such as unwinding arbitrage positions, limiting oil-related dollar demand, and intervening through dollar sales point to a preference for smoothing volatility while letting broader balance-of-payments forces influence the trend.

Conclusion

The rupee has steadied near the 93-per-dollar region at points after RBI oversight and intervention helped calm volatility, but the underlying pressures from capital outflows, trade dynamics, and uncertainty remain. With FX reserves still sizeable and polls expecting continued intervention, near-term moves are likely to stay tightly linked to flows, global risk sentiment, and any clarity on tariffs and trade negotiations.