Rupee Remains Steady as State-Run Banks Intervene to Curb Dollar Demand
Mumbai, December 26, 2025 – The Indian rupee showed little movement on Friday, maintaining a stable range amid thin holiday trading volumes. Market participants attributed the steady performance to routine corporate demand for the dollar balanced by intermittent interventions from state-run banks aiming to blunt upward pressure on the dollar.
As of 10:30 a.m. IST, the rupee was nearly unchanged at 89.83 per U.S. dollar. Traders noted that while domestic state banks occasionally supplied dollars to the market, Chinese institutions appeared to be absorbing dollars, highlighting contrasting currency dynamics between the two Asian economies.
The Chinese yuan was steady at around 7 per dollar, having appreciated approximately 4% against the greenback and over 9% versus the Indian rupee so far in 2025. Analysts at ING pointed out that a pending trade agreement between China and the U.S. remains critical for the rupee’s outlook. They also noted that increased repatriation of earnings by Chinese exporters could further strengthen the yuan, putting additional pressure on the rupee.
In contrast to the currency movements, Indian equities and the rupee have generally lagged behind their Chinese counterparts throughout the year. Reflecting cautious sentiment, the dollar-rupee forward premiums extended their decline from the previous session, with the one-year implied yield dropping 8 basis points to 2.75% and the one-month forward premium edging slightly lower to 39.50 paise after surging earlier in the week.
Other Asian currencies mostly traded within narrow ranges, while the U.S. dollar index hovered near a two-month low and was positioned for its worst annual performance since 2017. The softer dollar is attributed largely to expectations of further interest rate cuts by the U.S. Federal Reserve, despite differing outlooks among major central banks. Market participants are also awaiting President Donald Trump’s nomination for a new Fed chair to succeed Jerome Powell, whose term expires in May 2026. Meanwhile, markets in Australia, Hong Kong, and much of Europe were closed for the holiday, contributing to thin liquidity as traders begin to shift their focus towards 2026. Reporting by Jaspreet Kalra; Editing by Rashmi Aich
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