The rupee saw wild swings on Monday, moving a whopping 170 paise intraday. It breached the 95 level per dollar for the first time before closing at a new low of 94.83 on the last day of trading in the current financial year.
Reserve Bank of India’s (RBI) measures, announced last Friday, asking banks authorised to deal in foreign exchange to unwind long dollar positions in the domestic forex market initially strengthened the rupee substantially below the 94 level.
However, it reversed the gains, moving beyond the 95 mark, due to rising crude oil prices, strengthening dollar, month-end importer demand and FPI-related outflows from the domestic equity markets amid the intensifying West Asia war.
Opening about 131 paise stronger against the previous close of 94.8125, the Indian currency closed at 94.83 per US dollar. Intraday, it tested a high/low of 93.50 (also the opening level)/95.22.
Overall, the rupee has depreciated about 11 per cent in FY26 and 5.50 per cent in the fourth quarter (Q4FY26). In the last one month, it has declined more (3.54 per cent) against the US dollar as compared to some of the emerging market currencies such as Chinese Renminbi (0.8 per cent down vs dollar), Indonesian Rupiah (0.77 per cent) and Malaysian Ringgit (2.58 per cent).
Two-way move
Amit Pabari, MD, CR Forex Advisors, noted that the sharp two-way move in the rupee — appreciating towards the 93.50-93.60 zone and then reversing back beyond 95.00, reflecting an ongoing tug-of-war between regulatory-driven flows and underlying real dollar demand.
He said it seems the RBI’s move to cap banks’ net open position – Indian rupee in the onshore deliverable market to within $100 million at the end of each business day has begun to trigger position unwinding, particularly in offshore NDF (non-deliverable forward) markets.
“This was reflected in the sharp morning appreciation, which seems to have been driven by banks trimming long-dollar arbitrage positions, temporarily boosting dollar supply,” Pabari said.
Incremental supply
However, the sustainability of this move appears to have been quickly tested. Importers and corporates stepped in aggressively near the 93.50 levels to cover exposures — likely aided by financial year-end considerations. This, in turn, seems to have absorbed the incremental dollar supply and contributed to the reversal back above 95.00.
Abhishek Goenka, Founder & CEO, IFA Global, said despite initial strength supported by the RBI’s move to reduce banks’ overnight net open position limits, the rupee failed to hold gains and reversed sharply due to a combination of rising crude oil prices, persistent geopolitical tensions, and a strong dollar environment.
“The dip towards 93.50 levels attracted aggressive importer demand, while breach of key levels triggered stop losses, accelerating the fall to a record intraday low of 95.22 — marking a swing of over 160 paise in a single session,” he said.