The rupee staged a significant rally against the US dollar on Wednesday, strengthening by more than 1% in the session after four straight days of record lows. The Reserve Bank of India intervened in the foreign exchange market to deal with volatility, with state-owned banks selling dollars on its behalf. According to dealers, RBI was selling dollars, but the recovery is only partly due to the intervention. The market also moved away from the 91 per dollar level, with traders trimming long dollar positions.

The rupee, which had opened marginally weaker at 91.07 per dollar compared to the previous close of 91.03, reversed course and traded as high as 90.25 during the day as cooling crude oil prices also helped boost sentiment.

Market participants indicated that the rupee’s sharp depreciation in recent sessions was driven by ongoing foreign portfolio outflows and unresolved trade negotiations between India and the US. As the currency approached resistance near 91 per dollar and demand for dollars eased, stabilization followed.