Mumbai, December 22 (Reuters) — The Indian rupee is expected to open weaker on Monday after a sharp rally last week driven by aggressive foreign exchange intervention by the Reserve Bank of India (RBI). Traders are now weighing how much further support the central bank is willing to provide if the currency comes under renewed pressure.

The one-month non-deliverable forward (NDF) suggests the rupee will open in the 89.50–89.60 range against the US dollar, after surging nearly 1% on Friday to close at 89.27. Late-session dollar selling by the RBI sparked the rally, with market participants saying the move was aimed at curbing speculative positions and pushing the currency decisively higher.

During Friday’s session, the rupee jumped sharply from the 90.10–90.20 range to around 89.30 within minutes. The sudden move triggered stop-losses and forced traders to quickly reposition. Bankers noted that the timing of the intervention—late in the trading session—intensified the impact by limiting opportunities for counter-flows. A similar strategy was deployed earlier in the week, though that intervention occurred soon after markets opened.

In total, the rupee appreciated 1.3% in the last week, which is the biggest weekly gain since June and it is also a small step into the positive area on a month-to-date basis.

The market participants stated that the question whether the RBI would intervene further in case of rupee’s depreciation has been the focus now, and how efficiently the measures can handle the basic demand-supply imbalances in the currency market has been another point of debate.

At the week’s opening, Asian market indicators did not provide much direction with most currencies in the region flat while the dollar index was down only slightly. Bankers said recent intraday movements in the rupee have been driven more by domestic flows and RBI actions than by global factors.

In the absence of strong flows, analysts note that the USD/INR pair tends to rebound after major interventions. India Forex and Asset Management said 88.80 has emerged as a key support level for the rupee.

Market Indicators:

• One-month NDF at 89.98; onshore one-month forward premium at 34 paise
• Dollar index at 98.64
• Brent crude futures up 0.8% at $60.9 per barrel
• US 10-year Treasury yield at 4.17%
• Foreign investors bought net $313.3 million in Indian equities on December 18
• Net foreign investment of $30.8 million in Indian bonds on December 19