The Indian rupee staged a sharp recovery on Monday, February 2, gaining more than 40 paise against the US dollar, after slipping to a record low in the previous trading session. The rebound came amid suspected intervention by the Reserve Bank of India (RBI), which stepped in to stabilise the domestic currency as market volatility surged following the Union Budget.
After opening weak and flirting with its all-time low near 91.99 per dollar, the rupee strengthened to around 91.77 in early trade, marking a gain of nearly 0.2% from Friday’s close. As trading progressed, the currency extended its recovery to around 91.55.
Budget Concerns Weigh, But RBI Steps In
The forex market reopened after a two-day holiday during which the Union Budget for FY27 was presented in Parliament. While the budget outlined a higher-than-expected gross borrowing programme of ₹17.2 lakh crore for 2026–27—up 17% from the current fiscal year—it also reassured markets on fiscal discipline.
The government pegged the FY27 fiscal deficit at 4.3% of GDP and projected a decline in the debt-to-GDP ratio to 55.6%, reinforcing confidence in India’s long-term policy framework.
Despite these assurances, the rupee had ended January on a fragile note, posting a monthly loss of around 2.3% and sliding to a record low in the closing minutes of Friday’s session.
Expert View: Reassurance, Not Relief
Market experts believe the budget offered comfort on fiscal credibility but did little to immediately ease pressure on the currency.
“For the rupee, the budget offered reassurance, not relief,” said Amit Pabrai, Managing Director at CR Forex Advisors. He noted that while short-term pressures may persist, the broader message of fiscal continuity and growth remains constructive for the medium term.
Pabrai also highlighted that India’s Real Effective Exchange Rate (REER) still appears undervalued, which could support the currency over time.
Key USD/INR Levels to Watch
Near-Term Resistance and Support Zones
With USD/INR hovering just below the 92 mark, experts see this level as a critical near-term pivot.
- Above 92.00: A sustained break could open the door toward 92.20–92.50
- Below 92.00: RBI intervention and fiscal discipline could cap further weakness
Pabrai believes that continued central bank support may eventually allow the rupee to drift back toward the 91.00–91.20 range over time.
Broader Outlook Remains Constructive
Ponmudi R, CEO of Enrich Money, echoed a cautiously optimistic outlook for the domestic currency.
“While short-term consolidation is visible near the 92.00 handle, the overall bias for the rupee remains positive,” he said. According to him, the 91.40–92.50 zone acts as a strong support band, and a decisive move beyond 92.20 could trigger further upside in USD/INR.
He added that a firm dollar-rupee trend continues to support MCX bullion prices, even during phases of global profit booking.
Can the Rupee Rise Further?
While the rupee’s sharp bounce reflects RBI’s resolve to prevent disorderly moves, its medium-term trajectory will depend on several factors—global dollar strength, crude oil prices, foreign capital flows, and domestic growth momentum.
For now, the central bank’s presence in the market and the government’s commitment to fiscal discipline appear to be acting as key stabilising forces. However, sustained gains will likely require a softer dollar globally and improved risk sentiment.