Rupee boxed in by persistent importer hedging, central bank intervention

The Indian rupee held in a tight band on Monday, staying just above its record low as likely intervention by the Reserve Bank of India helped stave off pressure stemming from local importers’ steady dollar demand.

The rupee closed at 88.78 against the U.S. dollar, nearly flat on the day and in touching distance of its record low of 88.80 hit last week.

Several traders said that state-run banks were spotted offering dollars through much of the session, most likely on behalf of the RBI.

The RBI “has been present near these levels and seems to be protecting it firmly for now,” a trader at a private bank said. “If 88.80 breaks, 89 becomes the next level to watch,” he added.

Persistent worries over the hit to trade, portfolio and remittance flows from steep U.S. tariffs and tighter immigration policies has kept the rupee bogged down over the last few weeks and driving it down over 3.5% on the year despite broad weakness in the dollar.

On the day, India’s benchmark equity indexes, the BSE Sensex and Nifty 50 were up 0.7% each. Traders expect foreign portfolio inflows spurred by two large initial public offerings could offer the rupee some comfort later in the week. Non-bank lender Tata Capital’s $1.75 billion share sale kicked off on Monday while LG Electronics India will open its $1.3 billion IPO on Tuesday. “Interestingly, downside risks to (India’s) growth remain, but policy stimulus is nearing its limits. We believe if tariffs endure and growth slows materially in the second half of fiscal 2026, asset prices could correct further, potentially impacting the INR as well,” analysts at ANZ said in a note.

Meanwhile, a drop in the Japanese yen and the euro helped boost the dollar on Monday as political risks across continents came into focus for investors with the new election of a new leader in Japan and the resignation of France’s Prime Minister.