The Indian rupee strengthened sharply against the US dollar on Monday, February 2, gaining more than 40 paise after a likely intervention by the Reserve Bank of India helped arrest a slide toward record lows. The move came as markets reopened after a two-day holiday weekend marked by the presentation of the Union Budget, which had unsettled currency and bond markets with a higher-than-expected borrowing plan.
Trading resumed with the rupee initially poised to open near its all-time low of 91.9875 against the greenback, following a fragile close on Friday when the currency had slipped to a record low in the final minutes of the session. However, intervention by the central bank helped lift the rupee to around 91.77, representing a gain of about 0.2% from Friday’s close, according to a Reuters report. The currency extended its recovery during the session, strengthening further to 91.55.
The rebound followed a volatile end to January, during which the rupee posted a monthly loss of around 2.3%, reflecting persistent dollar strength, capital outflows, and pre-budget caution. Market sentiment had been strained by the Union Budget presented on February 1, which announced a gross government borrowing programme of ₹17.2 lakh crore for the financial year 2026–27, about 17% higher than the ₹14.61 lakh crore planned for the current fiscal year.
Despite concerns over the size of the borrowing programme, the government’s fiscal signals offered some reassurance to investors. The fiscal deficit for FY27 has been pegged at 4.3% of GDP, while the debt-to-GDP ratio is projected to ease to 55.6%. These targets were seen as reinforcing policy credibility and a commitment to fiscal consolidation, even as spending needs rise.
For the rupee, however, the budget did little to provide immediate relief. “The budget offered reassurance, not relief,” said Amit Pabrai, managing director at CR Forex Advisors. He noted that short-term pressures on the currency are likely to persist, but added that the broader message of fiscal discipline and growth continuity keeps medium-term prospects constructive, particularly with India’s real effective exchange rate still appearing undervalued.
Market participants are now closely watching the 92-per-dollar level, with USD/INR hovering just below that mark. According to Pabrai, a sustained break above 92 could open the path toward 92.20–92.50 in the near term. At the same time, he believes that continued RBI support and disciplined fiscal signals could act as a ceiling for the pair, allowing the rupee to gradually drift back toward the 91.00–91.20 range over time.
Echoing this cautiously optimistic view, Ponmudi R, CEO of Enrich Money, said the overall bias for the rupee remains positive despite near-term consolidation. He observed that the 91.40–92.50 zone has emerged as a strong support band, and that a sustained move above 92.00–92.20 could trigger a gradual upside extension in USD/INR. He added that the firm dollar trend continues to amplify domestic bullion prices, even during periods of global profit booking.
The coming sessions are expected to test the balance between RBI intervention, global dollar movements, and investor response to India’s fiscal roadmap, with the rupee’s ability to hold below the 92 level seen as critical for near-term stability.
