Rupee Rebounds: RBI Intervention Halts 5-Day Slide Against US Dollar

Mumbai: After a tumultuous week that saw the Indian currency plummet to historic lows, the Rupee finally found its footing on Wednesday, December 17, 2025. Snapping a relentless five-day losing streak, the domestic currency staged a significant recovery, appreciating by 55 paise to close at 90.38 (provisional) against the US Dollar.

This sharp turnaround comes as a relief to policymakers and investors alike, who had watched the Rupee breach the psychological 91-per-dollar mark earlier in the week. Market experts attribute this sudden halt in the currency's freefall to suspected aggressive intervention by the Reserve Bank of India (RBI), which reportedly stepped in to calm the volatile forex markets.

The Turnaround: A Day of Dramatic Recovery

The trading session began on a shaky note, with the Rupee opening weak at 91.05 against the Greenback, signaling that the bearish sentiment from the previous sessions was still lingering. On Tuesday, the currency had slipped below the 91 mark for the first time in history, touching a lifetime low of 91.14 before settling at 90.93.

However, the tide turned swiftly during intraday trading. The local unit staged a sharp rebound, rallying to an intraday high of 89.96. This marked a massive 97-paise gain from the previous day's close, before settling slightly lower at 90.38.

What Halted the One-Way Slide?

The primary catalyst for this recovery appears to be the central bank's decisive action. According to banking sources and market analysts, the RBI intervened aggressively by selling dollars in the market.

1. Strategic Timing: Unlike previous instances where intervention often occurred before market hours or through subtle nudges, reports suggest that the RBI began selling dollars shortly after onshore trading opened on Wednesday. This direct supply of dollars helped absorb the excess demand that was driving the Rupee down.

2. Spot and NDF Markets: The intervention wasn't limited to the spot market. The central bank is suspected to have operated in both the spot and Non-Deliverable Forward (NDF) markets. By selling dollars heavily, the RBI triggered sharp intraday reversals, forcing speculators to unwind their short positions on the Rupee.

Dilip Parmar, a Research Analyst at HDFC Securities, noted, "The Indian rupee appreciated after a five-day losing streak, bolstered by suspected aggressive intervention from the central bank."

Why Did the Rupee Fall in the First Place?

To understand the significance of this recovery, one must look at the factors that dragged the Rupee down. Analysts emphasize that the recent weakness was driven almost entirely by external headwinds rather than domestic economic frailty.

• US Tariffs & Trade Wars: The global economic landscape in late 2025 has been dominated by trade tensions. The Rupee has been hit hard by punitive 50% tariffs imposed by the United States, which has severely impacted sentiment. Reports indicate that no currency has been hit harder by these tariffs than the Indian Rupee.

• Capital Outflows: Uncertainty regarding a potential US-India trade deal has kept foreign investors on the edge. This has led to sustained investment outflows, with Foreign Institutional Investors (FIIs) selling equities worth over ₹2,381 crore on Tuesday alone.

• Global Dollar Strength: The Dollar Index, which measures the US currency against a basket of six major peers, rose 0.42% to 98.56, exerting further pressure on emerging market currencies.

Deepak Agrawal, Chief Investment Officer at Kotak Mutual Fund, highlighted that the fall was driven by "persistent capital outflows and dollar demand linked to non-deliverable forward maturities." He pointed out that despite India's strong GDP growth and healthy forex reserves, the lack of progress in trade talks has weighed heavily on the currency.

Market Outlook: Volatility to Persist

While the RBI's intervention has provided a temporary floor, analysts warn that volatility is likely to remain high in the near term.

• Technical Levels: The USD/INR pair now faces immediate resistance at 90.60, while support is seen at 89.70.

• Future Trends: Experts believe that the RBI is not trying to defend a specific level but is focused on curbing excessive volatility. A true structural recovery for the Rupee might only happen in 2026, contingent on the finalization of a US-India trade deal and a reversal in capital flows.

Broader Market Impact

The currency volatility rippled through the equity markets as well. Domestic benchmarks ended lower, with the BSE Sensex falling 120.21 points to close at 84,559.65, and the Nifty 50 slipping 41.55 points to end at 25,818.55.

Meanwhile, Brent crude futures, the global oil benchmark, rose 2.09% to USD 60.16 per barrel, adding another layer of complexity to India's import bill.

Conclusion: Wednesday's trade offered a glimpse of the RBI's resolve to prevent a freefall of the national currency. While the "invisible hand" of the central bank has stabilized the ship for now, the choppy waters of global trade politics and foreign investment flows will continue to dictate the Rupee's course in the coming weeks.