Mumbai: The Indian rupee showed signs of stability on Thursday after a sharp recovery in the previous session, but traders remained cautious as global markets stayed in a risk off mode and concerns persisted over capital outflows.
Market participants said the rebound was driven by strong intervention from the Reserve Bank of India, which sold US dollars aggressively through state run banks to arrest the currency’s steady slide. The action helped the rupee recover from record low levels and marked its strongest single day gain in nearly two months.
Despite the bounce, traders said confidence remains fragile. Many are closely watching whether the central bank will continue its intervention in the coming days to prevent renewed pressure on the currency.
The broader mood in global markets has remained cautious, with investors cutting exposure to riskier assets amid volatility in US equities and a stronger dollar. This has weighed on emerging market currencies, including the rupee, which has been among the weaker performers in Asia this year.
Foreign portfolio outflows have added to the pressure, with overseas investors trimming holdings in Indian equities and bonds. Dealers also pointed to steady dollar demand from importers and routine hedging activity as factors limiting any sharp appreciation in the rupee.
Analysts said the central bank’s intervention has helped curb one way moves in the currency, but warned that sustained stability will depend on broader factors such as global risk sentiment, progress in trade discussions, and a moderation in foreign outflows.
For now, the rupee is expected to trade in a narrow range, with market participants remaining alert to any further signals or action from the central bank as well as cues from global markets.