Rupee's Post-February Slide Mirrors Global Trend, Says SBI Research

Interestingly, the Indian rupee depreciated by 6.4 per cent between April 2, 2025 to February 27, 2026. At the same time, the dollar index also depreciated by 6 per cent during the same period.

This was the time when most currencies were appreciating against the dollar but not the rupee and thus perhaps the argument of using rupee as a shock absorber may have been overblown, according to the report.

The attempt to rationalise the open position for banks by the RBI though useful is likely to have created a significant divergence of the Onshore and Offshore markets.

Indian banks (both PSBs and PVBs) are generally long onshore and short offshore, while foreign banks exhibit a contra trend.

Meanwhile, India's foreign‑exchange reserves of over $700 billion are large enough to deter speculative moves and allow the Reserve Bank of India to intervene to stabilise the rupee.

The report from SBI Research said current reserve levels are equivalent to more than 10 months of imports and that short‑term debt is below 20 per cent of reserves, providing room and time to intervene in the market to prop up the rupee if it is so desirable.

The research firm, however, flagged that volatile capital flows and elevated oil prices pose risks to the near‑term outlook and urged several policy moves, including a special dollar window for oil marketing companies to meet the daily demand of $250-300 million.

"This should allow better visibility on genuine FX demand and supply dynamics and in measuring the efficacy of various countermeasures initiated by the regulator to curb unwarranted volatility," the report said.

The rupee saw its biggest single-day gain in nearly 13 years on Thursday, closing at 93.10 against the US dollar, as authorities stepped up efforts to curb currency speculation. The sharp rally came after the Reserve Bank of India tightened rules in both domestic and offshore markets.

- IANS