Indian rupee trading on Tuesday pointed to renewed market pressure: the currency weakened modestly, but traders said state-run banks sold dollars in a way that limited the slide toward the closely watched 91-per-dollar mark. :contentReference[oaicite:0]{index=0}
What changed in markets
The Indian rupee was quoted at 90.7625 per U.S. dollar at around 10:15 a.m. IST on February 17, down about 0.1% from the prior close, according to Reuters. :contentReference[oaicite:1]{index=1}
The move came as broader risk appetite stayed soft and local equities remained under pressure. Reuters noted that with several Asian markets closed, regional currencies were mostly moving sideways, while India’s benchmark Nifty 50 was modestly lower. :contentReference[oaicite:2]{index=2}
The key feature for traders was the flow in spot dollars. Reuters reported that dollar sales by state-run banks appeared to slow the rupee’s drift toward the psychological 91 level, and traders believed the selling was likely on behalf of the Reserve Bank of India (RBI). :contentReference[oaicite:3]{index=3}
Why 91 matters
In USD/INR trading, round numbers can act as informal “pressure points” because corporates, banks, and leveraged traders often cluster orders and hedges around them. That can turn a normal drift into a sharper move if the level gives way.
Amit Pabari, managing director at FX advisory firm CR Forex, told Reuters that “a decisive break above 90.80” could spark an “immediate 40-paise extension,” potentially opening room for a move toward 91.00–91.20 in the near term. :contentReference[oaicite:4]{index=4}
In practical terms, that range matters because it is where importers may accelerate hedging, exporters may step back from selling dollars, and speculative positioning can flip quickly if traders sense the central bank is willing—or unwilling—to lean against the move.
What’s driving the pressure now
Reuters tied the rupee’s softness to a mix of global and local factors:
Risk-off mood and equities
The immediate backdrop was subdued risk appetite alongside local stock weakness. When investors turn cautious, demand often shifts toward the U.S. dollar, and emerging-market currencies like the rupee can face incremental pressure even without a single headline catalyst. :contentReference[oaicite:5]{index=5}
Corporate dollar demand and hedging
Reuters said that after a burst of optimism earlier this month following the announcement of a U.S.-India trade deal, the initial euphoria faded as foreign portfolio flows stayed choppy and companies bought dollars to hedge liabilities. :contentReference[oaicite:6]{index=6}
That corporate hedging channel can become self-reinforcing: as USD/INR rises, firms with future dollar payments often lock in rates more aggressively, creating additional spot or forward demand for dollars.
Foreign portfolio flows
Reuters reported that India’s Nifty 50 is down nearly 2% year-to-date even as MSCI’s index of Asian shares excluding Japan is up a little over 10% in the same period. :contentReference[oaicite:7]{index=7}
On flows, Reuters said foreign investors have net sold roughly $2.5 billion of Indian stocks so far this year, after record annual outflows of nearly $19 billion last year. :contentReference[oaicite:8]{index=8}
Bank of America Global Research analysts told Reuters that investors want better equity performance and a convincing return of foreign portfolio inflows before taking meaningful long rupee positions against the dollar. :contentReference[oaicite:9]{index=9}
Why it matters for inflation, financing, and policy signals
A weaker rupee can filter into the economy in several concrete ways:
Imported inflation and price pass-through
When the rupee falls, dollar-priced imports—especially energy and some industrial inputs—can become more expensive in local currency terms. Even if companies don’t raise prices immediately, the higher replacement cost can show up over time.
External financing and hedging costs
Companies with dollar liabilities, or those that rely on imported components, often face higher hedging costs and tighter cash-flow planning when USD/INR becomes volatile. The “uncomfortable-but-true” reality is that currency moves often matter less as a headline and more as a quiet expense line that shows up later in margins and pricing decisions.
RBI signaling through intervention
Reuters’ description of state-run banks selling dollars “likely on behalf of the RBI” underscores a familiar pattern in India: rather than announce a level, the central bank can signal discomfort with abrupt moves by leaning against them through public-sector banks. :contentReference[oaicite:10]{index=10}
That does not guarantee a direction for the rupee. It does, however, influence how quickly the market tests the next level, because traders tend to reduce one-way bets when intervention risk is perceived to be high.
What to watch next
Near-term rupee direction will likely hinge on whether USD/INR holds above the 90.80 area highlighted by market participants, and whether equity sentiment and foreign flows stabilize. As Reuters framed it, the tug-of-war is between risk-off pressures and corporate dollar demand on one side, and state-bank dollar sales that can slow momentum on the other. :contentReference[oaicite:11]{index=11}