RBI Intervention Brings Stability as Rupee’s Recent Slide Slows

Mumbai | December 18, 2025

The Reserve Bank of India’s timely intervention has helped check the rupee’s sharp slide and restore near-term stability in the foreign exchange market, even as global risk aversion and trade-related uncertainty continue to weigh on emerging market currencies.

On Thursday, the rupee traded in a narrow range against the US dollar, supported by visible central bank intervention.
The local currency opened near 90.35 per dollar, firmed up briefly and then eased marginally, signalling consolidation after the sharp recovery seen in the previous session.
The rupee had earlier touched record lows of 91.14 before rebounding strongly.

How RBI intervention changed the tone

Market participants pointed to dollar sales by public sector banks acting on behalf of the RBI as the key factor supporting the currency. The intervention, carried out across both spot and forward markets, helped break the rupee’s one-way momentum and discouraged speculative positioning.

Traders indicated that it was the pace of depreciation – rather than the exchange rate level itself – that prompted the central bank to step in, in line with its long-held approach to volatility management.

RBI Only Manages Volatility, Doesn’t Defend Specific Rate

The RBI has consistently maintained that it does not target a specific exchange rate for the rupee. Its focus remains on ensuring orderly market conditions and preventing sharp, disruptive moves.

A rapidly weakening currency can raise imported inflation pressures, especially for fuel and commodities, and weigh on investor confidence. By acting when volatility intensified, the central bank aimed to smooth market conditions without resisting underlying global trends.

Why the rupee remains range-bound

Despite the recovery, upside in the rupee has remained limited. Market participants cited continued uncertainty around India–US trade negotiations, along with steady dollar demand from importers and corporates, as factors capping gains.

At the same time, global cues remain mixed. The dollar index stayed firm, while elevated global bond yields have kept risk appetite subdued across emerging markets.

Crude, equities and capital flows shows mixed signals

Oil prices offered some relief, with Brent crude rising modestly but remaining well below recent highs, easing pressure on India’s external balance.

Domestic equity benchmarks, however, traded cautiously amid weak global cues. Even so, foreign institutional investors remained net buyers in the previous session, indicating that currency volatility has not translated into broad-based risk aversion.

Recent move is seen as adjustment

Market experts view the recent volatility as a valuation adjustment rather than a signal of macroeconomic strain. The pressure on the rupee has been driven largely by capital flows and external trade-related uncertainty, not by a deterioration in India’s underlying fundamentals.

Real effective exchange rate (REER) indicators (Rupee valuation metrics) suggest the rupee is now closer to fair value, which may limit the scope for sustained depreciation from current levels.

What to watch from here

Market participants will closely track:

• Further RBI activity in the foreign exchange market
• Trends in US bond yields and dollar strength
• Developments on global and bilateral trade
• Crude oil prices and foreign portfolio investment flows

Bottom line

The RBI’s intervention has checked the rupee’s one-way slide and restored near-term stability in currency markets. While global factors will continue to influence movements, the episode reinforces confidence in the central bank’s ability to manage volatility and preserve macro-financial stability.