For now, the rupee remains under pressure due to weak stocks and sustained dollar demand, but RBI’s liquidity measures could offer short-term stability. 📉💰
February 22, 2025: Key Takeaways:
- The Indian rupee closed lower at 86.7125 against the US dollar, despite early gains.
- Persistent dollar demand from importers and weak equity markets pressured the currency.
- Foreign outflows exceed $11 billion in Indian stocks in 2025, further impacting the rupee.
- The dollar index rose to 106.6, while Asian currencies gained 0.1% to 0.3%.
- RBI likely intervened through buy/sell swaps to manage liquidity.
Rupee’s Performance This Week
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The Indian rupee weakened slightly on Friday, primarily due to strong importer demand for dollars and equity market losses, despite early support from a weaker US dollar.
🔻 Closing Rate: ₹86.7125/USD (vs. intraday high of ₹86.4850)
📉 Weekly Movement: +0.1%
Key Market Factors:
✅ A softer US dollar supported early gains.
❌ Dollar buying from foreign banks erased these early gains.
❌ Foreign investors sold over $11 billion in Indian equities in 2025, adding to pressure.
❌ Nifty and Sensex declined by 0.5%, dragging the rupee lower.
Global Market Impact on Rupee
🌎 Dollar Index: 106.6, recovering from a two-month low hit on Thursday.
💱 Asian Currencies: Most gained 0.1% to 0.3%, outperforming the rupee.
📊 US Economic Data:
- Markets remain cautious about US economic strength and its impact on the dollar.
- ING Bank: “We don’t expect a major USD downtrend, but volatility remains high.”
RBI’s Possible Intervention
🏦 Dollar-Rupee Forward Premiums:
- Rose early due to lower US bond yields but later fell.
- Traders suspect RBI conducted buy/sell swaps to balance liquidity.
🛑 Recent RBI Actions:
- Conducting swaps to offset the impact of spot dollar sales on liquidity.
- Announced a $10-billion forex swap to stabilize rupee fluctuations.
Conclusion: What’s Next for the Rupee?
💡 Key Watchpoints:
✅ Equity inflows: A reversal in foreign selling could support the rupee.
✅ US Fed Policy: Interest rate outlook will influence the dollar-rupee trend.
✅ RBI’s Future Moves: More interventions may be needed to prevent excessive volatility.