INR vs USD: Indian currency reverses early gains, moves towards record low of 94.98 on March 30; key details

As of 11:57 am on Monday, the Indian rupee was trading at 94.75 against the US greenback, compared to 94.77 at the previous currency market close levels, according to Investing.com data.

During the early market hours on March 30, the Indian rupee rebounded from its low levels to around $93.53 against the US dollar on the backdrop of Indian banks selling the foreign currency and a lower dollar index around the 100-mark psychological region.

Last week, the Indian rupee dropped to its fresh record low of $94.98 against the US dollar due to the higher dollar demand in the market amid fresh attacks in West Asia.

Why did the Indian rupee witness early gains?

The Indian currency is witnessing high pressure tussle between the dynamic global geopolitical situation over the West Asia crisis, which is fuelling the demand for the dollar in the market, and the RBI’s intervention to impose a cap on foreign exchange (forex) rules for banks.

The Reserve Bank of India imposed a $100 million cap on the net open rupee positions of Indian banks in the forex market for each business day. Due to this move, the banks that were holding large open positions in the local market, along with matching the same with offshore positions in the non-deliverable forwards market, were unwinding and recalibrating their open holdings.

The rupee strengthened against the US dollar in the early market session primarily due to banks selling dollars in the market and buying the rupee to balance off their trades under the new mandate, in turn improving the domestic currency before the April 10 deadline.

“As banks begin adjusting their positions, they are likely to sell dollars in the market, which can temporarily support the rupee. This creates a phase of relief, driven by position unwinding, not by a major shift in fundamentals, but still meaningful in the near term,” Amit Pabari, the managing director of CR Forex Advisors, told the news agency PTI.

US dollar pressure

The Indian currency was facing pressure from the elevated dollar index and the higher crude oil prices to the tune of over $108 per barrel. According to the agency report, the dollar index was firm above the 100 level due to the increased demand for safe-haven assets in the market, limiting the recovery of the rupee rate.

Data collected from the Bloomberg US dollar spot index showed that the US greenback was trading 0.02% higher at 100.167 as of 3:10 am (EDT) on Monday, March 30, due to the heightened uncertainty in the market.