The Indian rupee has emerged as the best-performing Asian currency this week, gaining 0.29 per cent against the dollar despite challenging global conditions. According to Business Standard, the currency staged a smart comeback in the last two days, settling at 95.69 per dollar on Friday against the previous close of 96.20 per dollar, representing a 0.53 per cent gain. The rupee's strength was primarily driven by heavy intervention by the central bank in both spot and forward markets, with RBI estimated to have sold around $2-3 billion through large state-run banks on Thursday and Friday each. As Abhishek Goenka, founder and CEO of IFA Global, noted, "With its aggressive intervention, RBI has created a USD glut in the banking system."
The rupee's recovery was significantly supported by lower crude oil prices after concerns over escalating geopolitical tensions eased. Brent crude oil prices fell to $104 per barrel on Thursday and remained around the same level on Friday, after hitting a high of $112 per barrel during the week. Sentiment improved after reports suggested that the United States and Iran had reached a final draft of a peace agreement, with hopes of diplomatic progress in the Middle East supporting risk sentiment. The reopening of the Strait of Hormuz would be particularly beneficial for India, as trade flows with the Middle East could normalise, though markets are awaiting the final signed agreement.
Market analysts remain cautiously optimistic about the rupee's prospects despite ongoing geopolitical uncertainties. Dilip Parmar from HDFC Securities noted that "the Indian rupee maintained its upward momentum for the second straight day, effectively reversing the losses sustained at the start of the week." According to Parmar, "Technically, spot rupee faces resistance at 96.20 per dollar and support at 95.40 per dollar." The near-term trend has turned supportive for the rupee, with RBI intervention continuing to play a key role in controlling volatility and restoring confidence in the forex market. Despite the recovery over the last two sessions, the rupee remains under pressure over the longer term, having depreciated 10.12 per cent over the past one year and 6.08 per cent in the current calendar year so far.
Despite the rupee's recovery, India's foreign exchange reserves hit a near one-and-a-half-month low after falling $8 billion in the week ended May 15 to $688.9 billion as the central bank stepped up its intervention. According to a Barclays report, India was the biggest USD seller, both in spot and forwards, since the war began, followed by China and the Philippines, while Singapore was a USD buyer. Total reserves declined around $39 billion after touching a record high of $728 billion for the week ended February 27, 2026. The latest rise comes after the currency had rebounded 50 paise on Thursday from its record closing low to end at 96.36 against the greenback, with the domestic unit also benefiting from a decline in US Treasury yields and strength in Indian equities.
Commerce and Industry Minister Piyush Goyal announced on Thursday that the government is considering several steps to contain the widening Current Account Deficit (CAD) amid a weakening rupee and widening trade deficit. The government's proactive approach to address the currency's weakness comes as the rupee continues to face pressure from global uncertainties and trade imbalances. The recovery is largely attributed to the Reserve Bank of India's active intervention following its USD/INR buy-sell swap announcement, along with easing geopolitical tensions that have softened imported commodity prices and provided relief from imported inflation and oil demand for dollars.
