The Reserve Bank of India
sold $2 billion to $3 billion on Thursday to defend the rupee
against relentless pressure and stepped in again on Friday,
helping it strengthen past the 96-per-dollar level, according to
bankers.
The RBI intervened via large state-run banks before the
market opened on Thursday, triggering a rally in the rupee, with
dollar sales continuing through most of the day.
The rupee rose 0.64% to close at 96.20 on the back
of that intervention and extended past the 96 level on Friday,
when the RBI resumed dollar sales, the bankers said.
Around $500 million was sold pre-market on Thursday, two of
them added, with limited market liquidity at the time amplifying
the effectiveness of the intervention.
The bankers did not want to be identified as they are not
authorised to speak publicly.
The intervention is a step up from recent days, when dollar
sales averaged $1 billion.
India is also considering several steps to counter the
depreciation in the rupee, trade minister Piyush Goyal said on
Thursday, after the currency hit a string of a record lows in
recent weeks.
Intervention estimates are typically based on market
intelligence, with bankers tracking activity in state-run banks,
inputs from FX brokers, and volumes on order-matching platforms.
Such pre-market intervention has been used previously by the
RBI to deter speculative positioning and temper expectations of
further depreciation. The rupee had declined roughly 2.5% over
the two weeks leading up to Thursday’s intervention.
The central bank did not immediately respond to an email
seeking comment.
A change in how the RBI intervenes has also helped the currency,
traders said. Until Thursday, the central bank had been
supplying dollars at market levels without driving the rupee
higher.
On Thursday, the dollar sales appeared level-agnostic and
geared to spark a rally in the rupee and possibly deter
speculative positions, a trader at a Mumbai-based bank said.
“The RBI is currently the sole major (dollar) seller,” a
treasury official at a private-sector bank said. Without a
moderation in oil prices, it will “remain that way”, he added.
Elevated crude oil prices triggered by the Middle East war
are the main pain point for the rupee currently. India, the
world’s third-largest oil importer, relies heavily on overseas
crude purchases, meaning higher energy prices translate into
larger daily dollar demand from refiners.
The depreciation bias is feeding into importer hedging of
forward dollar payments, with expectations of further rupee
weakness adding another layer of structural demand for dollars.