The Indian rupee staged a sharp recovery on Thursday after the Reserve Bank of India (RBI) rolled out a fresh set of forex restrictions aimed at curbing speculation, but market participants believe that the relief may be temporary amid persistent external pressures.
After a volatile session on Monday, the rupee opened sharply higher at 93.25 against the US dollar on Thursday. The local unit touched a high of 92.82, before closing at 93.1050, the highest percentage gain in a single day since September 2013, fuelled by targeted interventions by the central bank to tame speculation and volatility. On Friday, the rupee had hit an all-time low of 94.8325.
This appreciation of nearly 2% followed the central bank’s 1 April announcement of a second set of measures to curb speculation. RBI targeted the rebooking of cancelled forex derivative contracts and tightened norms around related-party transactions.
If a company or trader cancels a dollar hedge, they can no longer re-enter the same trade to benefit from price movements, limiting their ability to take directional bets under the guise of hedging. Separately, banks have been barred from undertaking foreign exchange derivative contracts with related parties, as defined under the Indian Accounting Standard (Ind AS) 2.
On 27 March, the RBI first capped banks’ net open positions (NOP) in the domestic market at $100 million at the end of each business day.
The forex derivative market is dominated by larger banks with gross onshore positions of $30-40 billion that offset each other, a 29 March Jefferies report said. Banks often buy dollar forwards cheaply in India and sell them at a premium abroad, keeping risks balanced on paper while profiting from the difference.
Market participants said RBI’s measures triggered a covering of short rupee positions, leading to the sharp appreciation. However, underlying pressures remain intact.
“Rupee is currently in uncharted territory. A lot of the movement now is dependent on regulatory moves. We expect the rupee to trade in a range of 92.50-93.50 until the 10 April deadline,” said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank. “Further cues will come from the RBI’s policy next week as well.”
According to a report by MUFG Global Markets Research team, the RBI’s latest steps are part of a broader effort to close the arbitrage window between onshore and offshore markets, especially after banks began unwinding positions following the earlier directive. While the measures may support the rupee in the near term, they could also widen spreads between both markets and reduce liquidity over time.
Mecklai Financial Services said that 92.50-93.00 levels are likely to be tested, and this could be the ideal zone for importers to cover their payment liability over the next couple of months, especially since the rupee will remain under pressure. It expects the local unit to trade in a broader range of 91.20–96.00.
The MUFG report said the fundamental flow picture for INR still points towards FX weakness moving forward. “As such once the dust on these regulations settle, we think it is still a good chance for clients to buy USD/INR if lower levels in the markets allow moving forward.”
Wednesday’s move in the rupee was largely driven by improved risk sentiment following US President Donald Trump’s speech, which hinted at negotiations rather than escalation in the ongoing US-Israel war against Iran, triggering a relief rally. However, uncertainty remains elevated, keeping volatility high in currency markets.
“The recovery appears more of a technical pullback after a sharp depreciation rather than a trend reversal. The near-term support for the rupee is seen near 92.50 and resistance 93.50,” said Jateen Trivedi, vice president and research analyst of commodity and currency at LKP Securities.
Selling by foreign portfolio investors and elevated crude oil prices continue to weigh on the rupee, and analysts believe that the ongoing war in West Asia has kept energy prices high, raising India’s import bill and dollar demand.
The currency has fallen by 4.5% since the war in West Asia began on 28 February, and 11% in fiscal year 2026 (FY26) due to continuous selling by FPIs.
“If oil prices continue rising in an adverse scenario, we think that USD/INR at 97.50 and even higher could be possible,” the MUFG report said.
