For weeks, the Indian rupee had been moving in only one direction, and the market had grown comfortable with that fact. Record lows became routine, hedging demand intensified, portfolio outflows persisted, and the exchange rate itself began to function less as a price and more as a test. By mid-December, when the currency slipped past 91 to the dollar, the question was no longer why the rupee was weak. It was how long the Reserve Bank of India (RBI) would allow the slide to continue before the behaviour around it became the problem.

The answer arrived abruptly. After closing at a fresh record low, the rupee staged its biggest one-day gain in seven months, rising nearly one percent as the central bank stepped in forcefully through dollar sales in the local market. The move was sharp enough to jolt positioning and unmistakable in its intent. Still, this was not about coaxing confidence back into the currency. It was about breaking a dynamic that had started to look one-way.

That distinction matters. Currency markets can tolerate fundamentals. They struggle with momentum. In the days leading up to the rebound, depreciation had begun to feel casual. Exporters delayed conversions. Importers hedged more aggressively. Speculative expectations hardened. When that happens, weakness stops being a reflection of macro pressures and starts feeding on itself. At that point, restraint risks being read as permission.

The central bank’s response was........

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