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Informist, Friday, Nov. 22, 2024

 

--Dealers: RBI asked some banks to trim big bets against rupee in spot mkt 

--Dealers: RBI deploying verbal intervention to support rupee at 84.50/$1 

 

By Pratiksha and Kabir Sharma

 

NEW DELHI – The Reserve Bank of India asked some banks on Friday to trim large bets against the rupee in the spot market to keep the domestic currency from falling below the key support level of 84.50 per dollar, dealers said. The Indian unit fell to a record low of 84.5000 a dollar earlier in the day.

 

The central bank nudged some big state-owned, private and foreign banks to cut their large positions against the rupee, currency dealers told Informist. The central bank informally communicated the directions to banks through phone calls on Friday, dealers said.

 

"They (RBI) want us to trim positions. It seems like they don't want positions building around any particular level. They just want a slow and gradual movement," a dealer at a private bank said. 

 

The RBI's action suggests that it likely wants to prevent any speculation against the rupee, and the subsequent volatility emanating from it, a dealer at a state-owned bank said. "I think we should now be prepared for this (verbal intervention) every time there is a key level approaching. We got a call earlier in the week as well," the dealer said. 

 

Apart from verbal intervention, the central bank also intervened persistently through dollar sales in the domestic spot market and offshore non-deliverable forwards market on Friday to support the Indian currency, dealers said. The rupee has moved in a range of just 5 paise so far on Friday. 

 

The rupee has been under pressure and fallen almost 0.5% against the dollar this month, in the face of foreign portfolio outflows from Indian markets and a strengthening dollar index. However, the RBI has made sure that the depreciation is gradual, thanks to its active dollar sales interventions. 

 

Further, the central bank's actions to support the currency comes at a time when its persistent dollar sales intervention in the spot market has led to its foreign exchange reserves falling to a near three-month low of $675.65 billion in the week ended Nov. 8. Reserves have declined by almost $30 billion in the past six weeks. 

 

In a similar move last month, the RBI had asked some state-owned and private banks to avoid placing large bets against the rupee in the domestic spot market.  End

 

US$1 = INR 84.45

 

Edited by Tanima Banerjee

 

 

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