Indian Rupee Bears Crushed by Central Banks Surprise Intervention

Ten months into his role, RBI Governor Sanjay Malhotra has sent a strong message to currency traders — the rupee will be allowed limited flexibility, but speculative bets will face firm resistance. The rupee surged nearly 1% on Wednesday after the central bank intervened in both offshore and onshore markets, forcing traders to unwind short positions. This move halted speculation about the currency breaching its record low of 88.80 per dollar, with it trading around 87.93 on Thursday.

Market participants said the RBI’s actions indicate it will tolerate moderate movement but act decisively when necessary. Backed by a robust economy, low inflation, and $700 billion in reserves, the RBI has the strength and intent to curb speculation. Analysts expect further strengthening, with MUFG forecasting 87 and Kotak Mahindra Bank projecting a range of 87.50–89.

The intervention, reminiscent of February’s surprise action, appears aimed at countering one-way bets. It also aligns with growing optimism over a potential India-US trade deal. Economists, however, believe this aggressive move is likely a one-time measure rather than a return to tight currency control.