MUMBAI: The Reserve Bank of India sold US dollars through state-run banks before the spot market opened on Friday, traders said, repeating its midweek pre-market intervention and underscoring its intent to support the rupee.
The RBI’s intervention helped the rupee open firmer against the US dollar despite pre-market signals of weakness.
Quotes in the interbank order-matching system had pointed to a possible dip past the 88 level before state-run banks stepped in to sell dollars on the central bank’s behalf.
The rupee climbed to a high of 87.75 on the back of the intervention, after settling at 87.82 on Thursday.
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The currency has rallied more than 1% over the last two sessions.
The RBI had intervened in a similar way on Wednesday, surprising the market with aggressive dollar sales, which helped squeeze out speculative long-dollar positions.
Bankers said Friday’s move builds on that momentum, reinforcing the view that the central bank will stay active in supporting the rupee.
“Would it be fair to say the RBI is signalling that 88 is now the floor (for rupee), or are they just emphasizing intent by following up on Wednesday’s move?”, a currency trader at a mid-sized private sector bank said. Until this week, the RBI’s interventions were largely aimed at defending the 88.80 level.
The latest pre-market actions mark a shift – intervening with the intent of pulling dollar/rupee lower and intervening before the market opens to set the tone, bankers said.
The RBI’s move was probably a reaction to what it saw as speculative pressure building on the rupee, HDFC Bank said in a note.
The lender expects USD/INR to trade in the 87.50–89.00 range in the near term, and said that a favourable outcome on the US-India trade deal could help the rupee appreciate, and push the pair below the lower side of that band.
American Dollar Exchange Rate