Rupee Tests 90-Per-US Dollar Level As RBI Announces $5-Billion Buy-Sell Swap

The Indian rupee slipped below 90-per-dollar level briefly on Friday after the Reserve Bank of India reduced the benchmark repo rate by 25 basis points to 5.25% and announced a $5-billion buy-sell swap of a three-year tenure.

"As far as the rupee is concerned, it is not positive. Having said that, we are not seeing much negative impact on the currency as of now. Maybe RBI is there," said Ritesh Bhanshali, director, Mecklai Financial Services. "The way RBI had come in at around 90.50 yesterday, they did not want the currency to breach the level. For rupee, 91.20–90.50 will be the upper end, and 88.00 will be the lower end."

The Indian currency quickly erased gains from the day's high against the greenback during the Governor Sanjay Malhotra's speech and fell below 90.00-a-dollar level. It fell as much as 4 paise to the day's low of 90.02 against the US dollar so far on Friday.

Earlier, the Indian rupee advanced 28 paise to 89.70 against the US currency. The rupee settled at 89.98 a dollar on Thursday.

The RBI will conduct the buy-sell swap on Dec 6. In the swap, the central bank will buy dollars and sell them at the end of the three-year tenure. This will likely weigh on the currency in the short-term.

The rupee hit a new low of 90.42 against the US dollar Thursday. The domestic unit came under pressure because of dollar demand amid foreign fund outflows and uncertainty about the US and India trade deal.

The central bank also announced that it will buy Rs 1 lakh-crore worth of bonds via Open Market Operations.

However, the losses in the domestic currency were limited against the greenback as the RBI raised forecasted a modest current account deficit for financial year 2026. Malhotra said that healthy services exports, remittances will keep India's current account deficit modest.