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Informist, Monday, Oct. 7, 2024

 

--Dealers: RBI deploying verbal intervention to support rupee at 84/$1

--Dealers: RBI asked some PSU, pvt bks to avoid big bets against spot rupee

 

NEW DELHI – The Reserve Bank of India asked some state-owned and private banks Monday to avoid placing large bets against the rupee in the domestic spot market to keep the Indian currency from falling below the psychologically crucial level of 84-per-dollar, dealers said.

 

The Indian unit touched a low of 83.9775 a dollar on Monday, just a whisker away from its record low of 83.9900 a dollar hit on Sept. 5. The central bank informally communicated the directions to banks through phone calls Monday, dealers said. "There were direct calls made to us by them (RBI)," said a dealer at a private bank on the condition of anonymity. "They (RBI) don't want trades around these levels."

 

The central bank does not want traders to build large positions against the rupee around the current levels, and they are using "everything at their disposal" to prevent that, a currency dealer at a state-owned bank said. "Right now, there are only client flows in the market. Other than that, there are no counterparties for trading," the dealer said.

 

Apart from a verbal intervention, the RBI also intervened persistently through dollar sales in the domestic spot market Monday to keep the Indian unit from hitting a record low. The rupee moved in a range of just 3 paise throughout the day.

 

The Indian unit had fallen below 84-a-dollar in the offshore non-deliverable forwards market Friday after the dollar index surged following a stronger-than-expected US non-farm payrolls report that dashed hopes of further aggressive rate cuts by the US Federal Reserve this year. However, the Indian unit opened at 83.9450 a dollar Monday in the spot market as the central bank stepped in to sell dollars in the offshore non-deliverable forwards market, dealers said.

 

Notably, the central bank's actions to support the Indian currency come at a time when India's foreign exchange reserves are at a record high and have topped the $700-billion mark. India's foreign exchange reserves were $704.89 billion as of Sept. 27.

 

The apex bank had carried out a similar move in early August to prevent the local unit from testing the key level of 84 per dollar. Though the rupee is trading just a few paise away from the key level, looking at the RBI's resolute actions in the segment, currency traders do not expect the 84-per-dollar mark to be touched any time soon.

 

End

US$1 = INR 83.9775

 

Reported by Pratiksha

Edited by Rajeev Pai

 

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