The Indian rupee surged 66 paise on Monday to close at 95.91 against the US dollar, after Reserve Bank of India Governor Sanjay Malhotra indicated that the domestic currency is undervalued and highlighted strong foreign currency inflows, according to a report by Business Today. The central bank's supportive messaging, coupled with market intervention, helped the rupee gain as much as 76 paise intraday.
RBI Intervention and Undervaluation Signal
Dealers noted that the RBI was seen intervening through public sector banks in both spot and forward markets, amplifying the currency's rally, the source reported. The rupee also drew strength from a sharp decline in global crude prices, with Brent falling about 10% in early trade to below $88 per barrel amid easing geopolitical tensions.
In an interview to Business Line, Governor Sanjay Malhotra stated:
"I would also like to reiterate that it would be reasonable to think that the rupee is not overvalued. If anything, one could argue that the rupee has become undervalued, both in nominal and in REER (real effective exchange rate) terms."
On foreign inflows, Malhotra added: "Till date, banks have mobilised almost $32 billion. Obviously, most of it is coming through FCNR (B) deposits."
Stock Market Rally
Meanwhile, the stock markets snapped their losing streak, with the Sensex jumping 776 points to settle at 76,836. The Nifty surged 229 points to end at 23,996, according to the report.
Key Data Points
| Metric | Value |
|---|---|
| Rupee close vs US dollar | 95.91 |
| Rupee intraday gain | 76 paise |
| Rupee change from previous close | +66 paise (previous close 95.25) |
| Sensex close | 76,836 (up 776 points) |
| Nifty close | 23,996 (up 229 points) |
| Brent crude price | Below $88 per barrel (down ~10%) |
Implications for Trade Finance and Business
The stronger rupee reduces the cost of imported goods and services, benefiting import-dependent businesses. The RBI's intervention and signal of undervaluation may help stabilise the currency, reducing uncertainty for corporate treasurers managing forex exposures. The sharp fall in crude oil prices further lowers input costs for industries reliant on petroleum. The robust foreign inflows, particularly through FCNR (B) deposits ($32 billion mobilised), indicate improved capital account flows, which can ease refinancing pressures for companies with external borrowings.
Sources:
